RESERVE BANK TIGHTENS RULES TO REIN IN FRAUD

Farther from double digit

The central bank’s attempts to bring prices to heel are adding to the ebbing momentum as government spending has not slowed enough. And although the trade gap has shrunk appreciably between 2009-10 and 2010-11, it continues to be above 5% of GDP as ..........

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Council set up to promote RTI Act - Aims For Better Implementation In State

Pune: Right to information activists from different parts of the state have come together to form the ‘Maharashtra Right to Information Council’. Addressing a press meet on Thursday, the activists said the council aims at better implementation of the act in the state. “The act has completed five years. Though it has managed to deal with various issues, there is a lot of scope. People from all strata of society should be able benefit from this act. The council will work for spreading awareness of the act among the people,” said Vivek Velankar, RTI activist and founder of Sajag Nagrik Manch. The council will work towards streamlining the processes under the RTI act and will study the way the act is followed in government offices and schemes, including the employment guarantee scheme, public distribution system. “RTI coordinators will be appointed at district level. The council will work as an informal forum for activists and orgnisations working for the RTI,” said Vijay Kumbhar, coordinator of Surajya Sangharsha Samittee. Kumbhar said organisations should come forward to be part of this council. The activists said the process of selecting chief information commissioners should be more transparent. It has been observed that only ex-bureaucrats are made chief information commissioners. Those who have made remarkable contributions to the society should be also given opportunities, they said.

TOI

India must employ all tools to curb inflation

We must remain committed to maintaining inflation at a low level," Chakravarthy Rangarajan, chairman of the Prime Minister's Economic Advisory Council, said ..........

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RBI Plans a Purity Test on Gold Fincos

Central bank is probing the books of some gold financing cos to assess the concentration risk on a single asset. The Reserve Bank of India (RBI) is examining the books of some gold financing companies to assess the implication of concentration risk that could make the non-banking sector shaky in the event of a sharp fall in gold prices, as it happened with silver recently. The banking regulator may also probe whether these companies followed the know-your-client (KYC) norms, which the central bank is very keen on to prevent money laundering, said two people familiar with the development. “We are examining the books of select non-banking finance companies (NBFCs) involved in gold financing,” an RBI spokesperson said, confirming the development. Muthoot Finance (MFL) and Manappuram General Finance & Leasing (MGFL) are the largest gold financiers that are listed on the Bombay Stock Exchange.

ET

RBI organises outreach programmes

District Collector P. Umanath (second left) releasing Thanjavur Brihadeeswarar Temple commemorative coin of Rs. 5 denomination at a function held in Coimbatore on Wednesday. General Manager of Reserve Bank of India (Issue Department) - Chennai G.P. Borah (left) is in the picture

COIMBATORE: The Reserve Bank of India (RBI) organises several outreach programmes to create awareness on the banking schemes, banking ombudsman, and fake notes. Speaking at the inaugural of the RBI stall at the Government exhibition here, its General Manager (Issue Department), Chennai, G.P. Borah said that as part of the outreach effort, the RBI puts up stalls at government and private exhibitions, and organises exchange melas in association with other banks. He said that this year, it was participating at the Government exhibition in Chennai, Madurai, Coimbatore, Tiruchi and Tirunelveli. The objective was to create awareness about rural planning credit, non-banking finance, and foreign exchange, distributing coins, and exchanging soiled notes. Awareness was also created on fake notes, and lottery emails. The RBI was conducting training for Government departments on detecting fake notes. Releasing the commemorative coin on Thanjavur Big Temple, District Collector P. Umanath said there was a need to be alert on fake notes. The public, traders and large-scale institution representatives should visit the stall at the exhibition and know more about the RBI initiatives.

The Hindu

RBI sees regional languages as bridge between banks, common man

Mumbai: Reserve Bank Governor D Subbarao today said aversion to the use of regional languages in banking has resulted in a majority of the population staying out of the formal banking system. The use of Hindi will help banks achieve the goal of financial inclusion, he said. "If, during the last 60-years, banking has not been able to reach every corner of the country, it is because the language of the common people and that of the banking (industry) is different,"Subbarao said before distributing the Rajbhasha Shield awards to banks at the RBI headquarters here. Subbarao said financial literacy is crucial for the success of the financial inclusion programme and people will pick up on the subject only if taught in Hindi and other regional languages. "There is a gap between the two (common people and banking industry) which is resulting in the advantages of one not reaching the other. We have to reduce this gap and Hindi and other regional languages will play the role of a bridge,"he said in his address delivered in Hindi. "We are confident Hindi alone will help us achieve our target. Through the use of Hindi will we be able to achieve financial inclusion,"he said, outlining the efforts taken by the RBI in adoption of Hindi. A majority of the country's population continues to be out of the formal banking system which resulted in the Government announcing an ambitious financial inclusion drive through its budget in February 2010. Under the scheme, banks have been asked to reach out to 73,000 villages across the country having a population of over 2,000 people by March 2012.

http://www.indiareport.com/

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RBI employee's residence burgled of 9 L ornaments

MUMBAI: The Santa Cruz (W) residence of a Reserve Bank of India (RBI) employee was burgled of gold ornaments worth Rs 9.1 lakh on Tuesday.  Ujwala Dhakras (53) and her husband Anil were at work while their two teenaged daughters had stepped out for shopping when the burglary took place between 12 noon and 3.25 pm. "The couple stays with their daughters at the RBI officers' quarters. The burglars smashed open the door latch and made away with gold necklaces, rings, bangles and other ornaments from the cupboard," senior inspector Madhukar Chaudhari said.  When the girls returned from their shopping trip, they found the house ransacked and immediately informed their mother. The police were yet to make any arrests. Meanwhile, a row house in Juhu was burgled of valuables and cash worth Rs 70,000. The complainant, Napoleon Misquitta (56), was out on a trip with his family when the incident occurred. Misquitta runs a garage and stays in Irla gaothan.  "The family was away between 8 pm on Monday and 10 am on Tuesday when the burglary took place," a police officer said.  The burglars broke open the door latch and decamped with a gold chain worth Rs 60,000, a cellphone worth Rs 5,000 and Rs 5,000 in cash. Misquitta discovered the burglary on returning home and informed the Juhu police.

TOI

Balance enquiry at ATMs to cost from July 01

All non finance transactions at ATMs other than the home bank of the customer would come for a fee from July 01, 2011. Thus, apart from the five free transactions allowed to every customer at non bank ATMs, all non finance transactions would also come at a cost from now.  Regulator Reserve Bank of India has taken this decision after seeing excessive usage of non bank ATMs by customers for checking account balance, mini statement and other purposes. The step has been taken to put some discipline in the customer.  The month of April saw 28% of the total transactions occurring on the National Payments Switch due to balance enquiry and mini statement. This led RBI to come to a strong decision in this regard.  In the meanwhile, RBI has also taken steps in favour of the customer. Now all complaints from customers regarding faulty ATM transactions need to be redressed by the concerned bank within 7 days of the complaint. Else for every additional day, the customer will receive a compensation of Rs 100 per day from the bank.

Rupee Times

Bank of Baroda - Change in Directorate

Bank of Baroda has informed BSE that, in exercise of the powers conferred by of clause (c) of sub-section 3 of section 9 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 read with sub clause (1) of clause 3 of The Nationalised Banks (Management & Miscellaneous Provisions) Scheme 1970, the Central Government vide its notification dated May 30, 2011, has nominated Shri. Sudarshan Sen (Regional Director, RBI, Ahmedabad) as Director of Bank of Baroda, vice Shri. R Gandhi with immediate effect i.e. May 30, 2011 and until further orders.

http://utvmoney.mangopeople.com/companies/bank-of-baroda/BANKBARODA/announcements/2011-05-31/bankofbaro/178994

RBI objects PSU banks' hiring process

Watch the video............. 

Reserve Bank of India is not happy with the process banks adopt in hiring employees through campus recruitments, reports CNBC-TV18’s Gopika Gopakumar. RBI wants Indian banks to give equal opportunities to every employer. Hence, it has asked to slowdown on campus recruitment and look at other avenues of hiring. This will give candidates from rural areas a better chance at acquiring a job.  Therefore, RBI is promoting the traditional method of written tests as selective criteria. According to RBI deputy governor KC Chakraborty, “When financial inclusion is a major national objective being partnered by banks; don’t we need people who would be closer to the ground realities on the Indian country side? If yes, then why should we be rushing to the B-school campuses for recruitment? How many of the people recruited from such campuses will have empathy towards the poorest of the poor? I don’t say that none of them will fit the bit, but are we looking for the right traits in the recruitment test?” This concern seems to be the major worry of the RBI. On the other hand, banks are defending their current hiring process by saying that the campus recruitment is only meant for specialized positions. However, one needs to ask a question that since RBI itself is opting for campus recruitment, is it giving itself a better chance of picking up the best in the litter.

Money Control

Is Hasan Ali fibbing?

HYDERABAD: The police are still in the dark whether the alleged money launderer Hasan Ali’s claim of stashing the precious jewellery of the Nizam in the Union Bank of Switzerland (UBS) is true or not. And the information provided by the Reserve Bank of India officials that the Nizam’s jewels are still intact with them only adds to the confusion. Hasan Ali had earlier confessed to the Enforcement Directorate officials that he had stashed away Nizam’s jewellery along with some other artifacts at the UBS. But during the investigation police found that all the 173 jewellery items belonging to the Nizam were intact with the RBI. “There is a lack of clarity since the Enforcement Directorate officials had not quizzed Hasan Ali further about the Nizam’s jewellery and its source of access to them. ED officials only concentrated the investigation on the allegations of money laundering,” sources said. As reported by Express on Tuesday, Central Crime Station (CCS) police had moved a petition in the Nampally criminal court to permit them to question Hasan Ali, who is presently lodged in Mumbai jail, so as to obtain further details. The decision of the court on the petition will be known on June 3. In 1979 some of the Nizam’s family members had decided to sell the jewellery through an international auction. But the Supreme Court had to interfere after a petition was moved against the auction citing that the Nizam’s jewellery were antiques and should be declared as national wealth. The central government then decided to buy the jewellery by fixing a price as suggested by an arbitrator. “Initially the family members demanded Rs 225 crore for the 173 items. But later the selling price was fixed at Rs 180 crore. Since then the jewellery is kept in the RBI locker,” sources said. Whenever the jewellery is kept for display either at Salarjung museum or any other part of the country, unprecedented security is provided by central forces. Even the senior officials of Salarjung museum are not spared and have to undergo frisking before gaining entry. Sources said that the missing gaps in Hasan Ali’s confession can be filled only after the police questions him regarding the case. This makes the June 3 decision of the court all the more critical.

Banks need to raise capital: Subbarao

Reserve Bank of India (RBI) Governor D Subbarao said banks would need to increase their capital going forward to meet rising credit demand. “Our banks are well capitalised, at the aggregate level somebanks might have to bring in more capital. But the problem is going forward as credit demand will go up. And as banks will be required to meet that credit demand you (banks) will have to increase the capital,” he said. Subbarao made these comments at a Conference of Chief Executive Officers of Banks organised by the Centre for Advanced Financial Research and Learning last week. The RBI put up a video of the lecture on its website today. Banks’ loans in the fortnight ended May 6 stood at `39.57 trillion, up `383.84 billion from the previous fortnight. On Basel III norms, Subbarao said the cost of implementing them would drive up the cost of credit and hurt the competitiveness of banks. He said the implications of the second quantitative easing by the US for the rest of the world are not clear. In its second quantitative easing programme, the US Federal Reserve is set to buy bonds worth $600 billion by June. “It is doubtful to what extent QE2 (second quantitative easing by the US) has been good and bad for the rest of the world,” Subbarao said. On emerging markets, he said the concerns of these economies are seldom discussed at international level meetings, mainly because of limited research. Subbarao said the Centre for Advanced Financial Research and Learning can play a key role in helping India take an important position at the international level and making the countrys financial sector more knowledge-based. “I have been saying over the last two-and-a-half-years, the Reserve Bank of India must become a knowledge institution. But, I think the financial sector at a larger level must become a knowledge-based financial segment. That’s how we will thrive in this competitive globalising environment,” Subbarao said. On the global financial crisis, the RBI Governor said India was largely unaffected by the crisis but the changes it brought about have relevance for India.  So, banks must take another look at their business strategies in the context of the evolving regulatory, macroeconomic and socioeconomic architecture, Subbarao said. “Although we believed that we remained healthy before, during and after the crisis even then I believe that whats happening around the world the new reforms have relevance for us. Hence, there is a need to revisit the business strategies in the emerging regulatory architecture,” he said.

BS

Why microfinance needs the Bill

It is not surprising that the Microfinance Sector (Development and Regulation) Bill has gone back into cold storage. Critics would even question whether this stillborn Bill had ever come out of deep freeze in the first place. After all.......

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Sunil Mitra appointed Finance Secretary

Revenue Secretary Sunil Mitra on Wednesday took charge as the Finance Secretary in place of Sushama Nath, who superannuated on May 31 following the completion of her extended tenure. A 1975-batch IAS officer (West Bengal cadre), Mr. Mitra will continue to hold charge as the Revenue Secretary as well, a Finance Ministry statement said here. Since Ms. Nath was also Secretary, Department of Expenditure, in the Ministry, Disinvestment Secretary Sumit Bose has been appointed as the new Expenditure Secretary in her place. A Madhya Pradesh cadre IAS officer (1976 batch), Mr. Bose will also continue to hold dual charge till his replacement is found as Secretary, Department of Disinvestment.

Hindu

Public sector banks will recruit big-time this year too

(from left) Mr K. Ramakrishnan, Chief Executive, Indian Banks’ Association, along with Dr K. C. Chakrabarty, Deputy Governor, RBI,and Mr M. Balachandran, Director, Institute of Banking Personnel Selection, at a seminar in Mumbai on Tuesday

Institute of Banking Personnel Selection to offer ‘jobs-ready’ candidates

Public sector banks will continue their big-time recruitment drive this financial year. They will be recruiting by the thousands. Last year, the Institute of Banking Personnel Selection (IBPS) helped public sector banks fill 48,000 vacancies and this year the scenario is going to be no different, according to Director of the Institute, Mr M. Balachandran. Given the huge demand for manpower over the next few years, the Institute is planning to offer ‘jobs-ready' candidates for the banking system.  The Institute will take care of pre-placement training of the selected candidates on behalf of banks. The manpower crunch in the banking system, depending on productivity improvements, is estimated to be anywhere between 4 lakh and 7 lakh over the next 10 years, according to Mr M. V. Nair, Chairman and Managing Director, Union Bank of India. Banks are facing manpower crunch as thousands of employees who were recruited in the mid- to late-1970s will be superannuating in the next few years. There was a recruitment freeze for the better part of the 1990s. Hence, there is a fear of vacuum at the mid-management level.

HR challenges

“Public sector banks face a host of HR challenges, such as right manpower recruitment, training, retaining talent, succession planning, and leadership development… “Banks have to respond to the needs of the tech-savvy gen-next customers as well as the loyal old customers,” said Mr Nair, who is also the Chairman of IBPS. Union Bank of India is planning to recruit about 3,400 personnel in FY12 to take care of separation due to superannuation and attrition.  According to Bank of Baroda Chairman and Managing Director, Mr M. D. Mallya, banks should build competencies based on six pillars: buying (source the right manpower); building (provide training and development); borrowing (bring in specialist resource persons from outside); bounding (provide the right environment); bouncing (weed out non-performers); and binding (retain talent).  BoB is planning to augment its workforce by about 4,500 in the current fiscal, said Mr Mallya, who is also the Chairman of the Indian Banks' Association. State Bank of India, according to its Chief General Manager Mr A. K. Garg, is planning to boost its workforce by about 7,000, against 23,000 last year. “Since banking is becoming technology intensive, we need not necessarily replace every candidate who superannuates,” said Mr Garg.

Business Line

Don't `bank' on B-school graduates alone: RBI Deputy Guv

Reserve Bank Deputy Governor K C Chakrabarty questioned lenders' fascination with hiring B-school graduates and said that with concepts like financial inclusion being the driving theme, the banking sector needs personnel connected to the ground realities. "When financial inclusion is the major concern of Indian banking, don't we need people who would be closer to the ground realities of the countryside? How many of these people recruited through B-schools will have empathy towards the poorest of the poor? Why should we be rushing to the B-school campuses for recruitments?" he asked. Chakrabarty strongly favoured the conventional pattern of recruiting through competitive exams so that everyone gets afair chance of getting employment and the banks find the right talent. By going to the campuses, banks will get the "skills and knowledge" but not "talent" which comes naturally to an individual, he said, pointing out to his own personal experience of getting into a bank through a competitive exam. Chakrabarty also questioned the practice of online job applications, which is gaining currency among banks, saying that given the low Internet penetration, how many people would actually apply for the job? Because of the increasing thrust on financial inclusion, Chakrabarty said a greater stress should be also laid on hiring and training the right business correspondents who will act as a bank's representatives in villages.

FE

The Subbarao years - a defence : Abheek Barua

 

The criticism of the RBI Governor's handling of inflation is fraught with an oversimplification of the current inflation dynamics  

As the Pepsi tag line went, “Nothing official about it.” However, if the rumour mills are to be believed, these are the last few months of Reserve Bank of India (RBI) Governor D Subbarao’s tenure at the helm of the central bank. I am not going to add to the speculation over who is likely to succeed him. Instead, I would like to put in two bits on what the “ideal” successor would be like. First, we need someone who has a feel and regard for the financial markets. Unlike the government’s fiscal arm, the central bank has a real-time relationship with the financial markets — be it the bond, equity, foreign exchange or credit market. The markets take every little sound bite from the RBI extremely seriously and trust the central bank to provide stability. This trust needs to be reciprocated. Second, we need someone who can find the right balance between two very different forces that are currently impacting the economy. One, it is imperative for a domestic policy maker to have a first-rate understanding of what is happening in the rest of the world. This is particularly important since we are going through a phase in which there is a deep disconnection between economic policy in the developed and developing world. I would argue that it is much easier to manage the business cycle when trends across the world move in the same direction. On the other hand, when there is a divide, the likelihood of a domestic policy decision boomeranging on our own financial markets is far more acute. The interest rate-exchange rate nexus is an obvious example. In a scenario where all central banks are raising rates, the risk of currency appreciation – and an erosion in competitiveness – on the back of arbitrage-driven capital inflows is low. In a situation where the RBI is raising key policy rates but the Fed and the European Central Bank are desperately pumping in liquidity, the decision to raise rates becomes far more complex. However, despite the global system’s obvious influence, there is something unique about India’s current imbalances and problems. Since 2004, for instance, there has been a massive shift in terms of trade in favour of agriculture, which has had an impact on inflation. Schemes like the National Rural Employment Guarantee Act (NREGA) have paid off in term of raising rural incomes. At the same time, they have involved a massive reallocation and skew in resources, which have been manifested in acute shortages in the labour market. Thus, going by the NREGA experience, more large-scale social welfare programmes – like the right to food – are likely to breed imbalances and impact the way things like inflation behave. Therefore, monetary policy, or any macroeconomic policy for that matter, has to factor in this complex interplay of global influences and domestic trends. This brings me to what I had initially planned to do in this article: assess Dr Subbarao’s legacy. It has become a fashion now to take potshots at the governor based on his inflation management record. The argument is that he fell “behind the interest rate curve” and let inflationary pressures take root. The assumption is that if he had indeed raised policy rates a couple of times more or a little earlier, inflation would have come under control. While some of this criticism might appear legitimate considering that inflation is actually very high, it involves a gross oversimplification of the dynamics of the current inflation. More importantly, it shifts focus from what was, in my opinion, Dr Subbarao’s principal mandate — to manage the impact of the global financial crisis on India. Public memory tends to be short and people seem to have forgotten how bad things were in the last few months of 2008. Banks were winding up credit lines at a great speed, short-term interest rates had soared, the trade credit market had dried up and Indian industry was just days away from a shutdown. Yet there seemed to be utter confusion among both policy makers and professional economists about how aggressive the monetary response in India should be. Quite a few of them were still arguing that inflation should get top priority (remember that oil prices had gone through the roof in the first half of 2008) and that the Indian economy was reasonably insulated from the rest of the world. This was dangerous advice that Dr Subbarao rejected, opting instead to go in for massive monetary easing. I think we owe the RBI and the governor a debt of gratitude for the fact that the economy bottomed out at a growth rate of 5.6 per cent in the third quarter of 2008-09 and did not plunge any further. Dr Subbarao not only managed the crisis well, he also ensured that Indian markets did not fall prey to the post-crisis anti-market dogma. The fact that his regime actually stepped up the process of market development (the currency and interest futures markets, the steps towards making the credit default swap market operational and reinvigorating the corporate bond market) gives us a sense of the lessons that Dr Subbarao took away from the crisis. He clearly – and correctly, if I may add – did not believe that the collapse in global markets did not constitute a compelling case against financial deepening in a relatively underdeveloped market. India stood to gain a lot by creating new financial instruments, and the risk of a local crisis was minimal given that the degree of complexity of instruments was in no way comparable to those in the developed world. I have a feeling that Dr Subbarao understood at some stage that given the massive structural changes that the economy had gone through (I have referred to the terms of trade shift and the tightness in the domestic labour market earlier) and the asymmetry in global policy that bred things like commodity bubbles, domestic monetary policy alone would fail to stem inflation. If there is a legitimate criticism of the governor, it is the fact that he failed to communicate this to the market early enough. I think this was partly because of his natural reticence. Markets tend to like uber-confident, alpha male central bank governors. Dr Subbarao was certainly not one. In retrospect, that could turn out to be his biggest flaw.

The author is chief economist, HDFC Bank

BS

Savings account rates should have a floor rate set

The All India Bank Depositors Association (AIBDA) wants a floor rate to be set for savings account rates by regulator Reserve Bank of India.  With deregulation of the savings account interest rates on the cards, the depositors' body wants healthy competition to prevail along with protection of interest of customers and thus is insisting on the apex bank determining a floor rate. "The RBI must complete the reform of deregulating deposit interest rates by extending the deregulation to SB deposits...This would strengthen the process of financial inclusion as well as ensure market-based returns to the depositors due to competition among banks," said the AIBDA in a statement. The association has also suggested that the interest rates set by a bank should be the same for all depositors. It also suggested that a reasonable service charge should be levied by banks. "SB deposit rate still continues to be regulated by the RBI. This has resulted in SB depositors being deprived of market-determined returns even in a liberalised framework of our economy," said the AIBDA.

Rupee Times

India’s gross domestic product rose 7.8%

MUMBAI (MarketWatch) — India’s gross domestic product rose 7.8% in the January-to-March quarter from the year-earlier period, driven by agriculture and the service sector of the economy, government data showed Tuesday. That was below the average forecast of economists surveyed by Dow Jones Newswires, who expected GDP to be up 8.2% in the latest quarter. However, growth for the October-to-December quarter was revised up to 8.3% compared with an earlier estimate of 8.2%. The market has been concerned after the Reserve Bank of India recently said it is willing to sacrifice short-term growth to curb inflation. The RBI earlier this month hiked interest rates by a bigger-than-expected 0.5 percentage point. In April, year-on-year wholesale inflation came in at 8.66%. However, a slowing economy might reduce the need for further aggressive hikes in interest rates by the central bank.  “The rate hike has been successful in impacting investment demand, and we are now more confident that we would be close to the interest-rate-tightening cycle peaking,” said Jay Shankar, chief economist at Religare Capital Markets. Year-on-year growth in the finance, insurance and real-estate portion of the economy slowed noticeably to 9% in the January to March quarter from 10.8% in the previous quarter. According to HSBC’s chief economist, Leif Lybecker Eskesen, the slowdown reflects both the impact of monetary tightening on those sectors, along with reduced investment due to global risk aversion in markets from turmoil in the Middle East.  The agricultural sector also slowed to year-on-year growth of 7.5% from a revised 9.9% in the previous quarter. Mining also grew at a slower rate, with the approval of new projects that have met local resistance delayed ahead of recent elections in five states.  However, continued robust growth in overall consumption and export growth, along with the government allowing state-run energy firms to pass on higher fuel prices at the retail level, should continue to put upward pressure on inflation, HSBC’s Eskesen said.  “It is too early to jump to the conclusion that an end to the RBI’s tightening cycle is just around the corner,” he said.

http://www.marketwatch.com/