.......The incidence of chargeback complaints is about 0.031 per cent and it could be brought down to 0.010 per cent, according to NPCI’s estimates. Acknowledging RBI’s concerns, Sangeet Shukla, senior advisor (risk) at Indian Banks’ Association (IBA), said incidence had come down in recent years. RBI’s worry is on three counts — customer grievances, system integrity and time taken (delays) to correct the transactions...........
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Wednesday, December 11, 2013
Corporate debt recast: More failures than successes
....In order to stop the misuse of CDR mechanism, a Reserve Bank of India committee – headed by its executive director B Mahapatra has recommended that from April 2015, banks will not enjoy the regulatory forbearance while recasting debt. At present, post restructuring, a loan could continue to remain standard asset, subject to certain conditions. Restructured standard asset attracts a provision requirement of 5% as compared to 0.4% of standard advances. The Mahapatra committee has recommended that from April 2015, all restructured assets will attract a provision of sub-standard asset, that is, 15%. Higher provision requirement will hurt banks’ profitability.........
AIBEA blows the whistle on bad loans of Indian banks
......AIBEA’s demand will resonate with depositors who are being asked to pay higher charges for every service, to ensure higher profits for banks every quarter. AIBEA, for once, is on the same side as two big stakeholders of banks—bank customers and shareholders. Clearly,..........
'Top 30 NPAs of PSBs account for one-third of total bad loans'
........To improve the health of the financial sector and to improve asset quality of banks, besides preventing slippages, the Reserve Bank of India from time to time issues instructions to the banks. According to the norms, he said, each bank was required to have a robust mechanism for early detection of signs of distressed including prompt restructuring in the case of all viable accounts; to have a loan recovery policy which sets down the manner of recovery dues, targeted level of reduction and monitoring of write-off..........
Shining Through
........“I wanted to do something that would keep me busy beyond retirement age, and help me leave behind a legacy,” says Ahuja. His bet: Ratnakar Bank could move into a higher orbit with the right mix of brains and capital. But the ‘old’ private bank, set up in 1943, had its own concerns, and Reserve Bank of India had appointed two board directors to keep a watch on its affairs. Besides, both Indiabulls and Kotak Mahindra Bank were eyeing Ratnakar Bank. But in just three years, Ahuja and his team have delivered. From being a relatively unknown entity, it has gone on to become the Fastest Growing Small Bank in the BW | Businessworld Best Banks Survey 2013............
Stuff Of Folklore
....Axis Bank sees financial inclusion as an integral component of its rural strategy. It offers no-frills accounts, tailor-made fixed deposits and recurring deposit products to meet the savings requirements of customers. As of end-March 2013, the bank had opened 61.61 lakh no-frills accounts covering 42,338 villages. It tied up with telcos to provide savings and remittance facilities via mobile phones and their distribution outlets. The bank’s outreach efforts find reflection in the way it has gone about opening branches. It added 325 new branches, taking their number (along with extension counters or ECs) to 1,947, of which 883 branches and ECs are in semi-urban and rural areas and 1,064 branches are in metropolitan and urban areas. Ask Sharma why she believes these will be key growth drivers (the cost of doing business in these markets is high), and she tells you that the income gap between rural and urban India is declining and the rural consumer seems to be growing stronger..........
For The Long Run
...If there is one thing, Puri hates is the tag of an “elite bank”. He emphasises the point about HDFC Bank’s target being the aam aadmi. During 2012-13, the bank’s network expanded to 3,062 branches across 1,845 cities, up from 2,544 branches across 1,399 cities the previous year. The increase of 518 branches includes 193 micro branches, which are primarily two- or three-member branches meant to expand and deepen penetration in rural markets, including unbanked areas. The bank’s focus on semi-urban and under-banked markets continued with over 88 per cent of new branches coming up in semi-urban and rural areas. Puri’s belief is that it will be these markets that will drive the HDFC Bank story in the years to come, and he is ready to play the waiting game...........
Sailing Against The Tide
.......Sobti is not particularly concerned by the fact that IndusInd Bank still boxes in a lower weight category compared to peers like ICICI Bank, HDFC Bank and Axis Bank. A caveat is in order: IndusInd does compete with all of the aforementioned banks, but there is no crazy head-to-head duel for market share with any of them. “You must remember that we have grown at a steady 25-30 per cent annually. And we have over the last few years raised nearly Rs 4,000 crore in capital.” Sobti’s stint at IndusInd Bank has paralleled an economy that has largely been marked by indifferent sentiment, yet dud loans have been kept under control........
Making Rules Pay Off
....Not only would banks need to increase their chest of capital in the normal course of business, but the composition of this capital would also need to be re-jigged in order to create buffers to deal with particular economic conditions. Broad-level estimates published by the Reserve Bank of India in its annual report for the financial year 2011-2012 suggest that in order to achieve full Basel III implementation by 31 March 2018 (assuming a 20 per cent per annum uniform growth in risk-weighted assets or RWA of banks), the banking sector will require approximately Rs 1.6-1.75 lakh crore of common equity in addition to Rs 3.15-3.35 lakh crore in the form of non-equity capital...........
Rajat Gupta episode taught us values: Dominic Barton, McKinsey
.......the Reserve Bank of India and its governor were regarded in positive light. "The central bank is getting a lot of buzz," Barton said. "So people are saying, wow, that's interesting. And Raghuram Rajan is seen as a driver doing certain things. And that excites people."
Dent in your balance
...If the customer fails to maintain the minimum balance in the account, a fine is levied on it. The quarterly balance system can be slightly tricky; sometimes, without a customer even realising it, he might end up not maintaining the requisite average balance. It is, therefore, advisable to leave the requisite minimum balance for a fair number of days so that it gets adjusted .........
How not to get cheated while buying insurance
.....Ajay is yet to receive proper justice for the financial loss and mental trauma due to this mis-selling. Had this been done in U.K, the story would have been slightly different for him. Similar complaints were registered in U.K and the banks were slapped with fines worth £ 1.3 billion from the central bank. Sadly, RBI which is believed to be having stringent norms is yet to levy fines of such order on Indian banks. Well, this is the story of just one individual. There have been tons of individuals who are still suffering the loss due to mis-sold products of our dear Indian banks. Some of us have realized and others haven’t. Now that.........
Tuesday, December 10, 2013
Fixing monetary policy - Charan Singh
...More importantly, psychologically, it is more frustrating to be unemployed rather than facing inflation. The present tight monetary policy has not been successful in arresting the price level because it is based on a wrong premise—rising food prices—which cannot be tamed by rising interest rates. Rather it shall be helpful to lower the interest rates and provide positive impulses through forward guidance and ushering certainty in policy path to revive growth and investment...............
The Economy of India: Why Not to Take a Balanced View
......Both the government and RBI are expecting the CAD to be below $56 billion in the current fiscal compared to the record high of $88.2 billion, or 4.8 per cent of the GDP last fiscal. The government has taken several steps, including hike in gold import duty to 10 per cent and restrictions on import of gold bars and medallions, to restrict CAD. It has also taken measures to boost exports. A very recent study.........
Raghuram Rajan attributes current economic woes to domestic factors
.............Addressing investors at an Citibank event in New York, Rajan said economy has slowed to below 5 per cent from an average of 8 per cent between 2002-2012, mainly on account of domestic factors............
Read - ET....
Raghuram Rajan expects a spending squeeze as India aims to cut deficit
..........The Governor reiterated his commitment to the five pillars to improve the financial system. These include clarifying monetary policy framework, strengthening the banking structure through entry of new banks, broadening financial markets, moves towards financial inclusion, and to improve systems to deal with distress faced by financial institutions and corporates. Rajan blamed the financial stimulus for leading to an over-heated economy, high inflation and wage growth and consequently...........
Read - ET.....
Prepared for the taper
......For India, fortunately, the swap agreement that RBI put in place ensured $34 billion more came into the economy and, more importantly, in recent months RBI found a way to remove a very significant part of the demand for dollars—$164 billion in a full year—from oil importing PSUs from the daily market for foreign exchange. While RBI managed to slow down the depreciation of the rupee by selling dollars directly to oil PSUs and then entering into swap agreements—this ensured forex reserves didn’t fall—with them for a date in the future, the markets always felt this would worsen matters when .......
Raghuram Rajan says inflation still major worry for RBI
.........High inflation “is and will remain the key priority of monetary policy” even as there is a need to manage inflation “with an eye on the economy, so that you don’t kill growth”, said Rajan speaking at an interaction with institutional investors in New York, organized by Citigroup, on Friday night. Since he took charge from D. Subbarao on 4 September, Rajan has raised the key rate twice from 7.25% to 7.75%............
The microfinance sentinels
......In 1998, the National Bank for Agriculture and Rural Development (Nabard) set up a task force on Supportive Policy and Regulatory Framework for Microfinance, which found that microfinance institutions (MFIs) were an important vehicles for delivery of credit to the self-employed, particularly women, in rural and semi-urban areas. It suggested setting up a special cell within the Reserve Bank of India (RBI) to liaise with Nabard and MFIs to augment the flow of credit to this sector. The task force recognized the need for a mechanism of...........
RBI told to keep industry and banking separate
.....“Banking being a highly leveraged business involving public money and public welfare, the Committee are of the considered opinion that it will be more in the fitness of things to keep industry and banking separate. The Committee, therefore, desire the Government/Reserve Bank of India to review the licencing guidelines accordingly,” the report tabled in Parliament said...........
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