..............Bankers, including central bankers, tell us that nobody in banks wants to take decisions anymore. This is now a familiar pattern and going on for decades. Harassed borrowers then approach politicians and all investigations stop. At the root of the problem is the Reserve Bank of India, which has refused to act. In connection with our article, “Rot at the Top” about lack of accountability in Reserve Bank of India (RBI) and public sectors banks, Mr MR Sivaraman, a highly regarded retired Revenue Secretary of the union government, wrote to us with an interesting story about RBI’s negligence............
The very purpose of VITALINFO is to provide a platform for wider dissemination of updated information related to and happening of events in and around RBI.
Thursday, August 21, 2014
RBI’s draft norms for smaller banks: Raghuram Rajan is repeating a mistake
............To be sure, the RBI corrected its mistake by deciding not to grant any further LAB licences. Seventeen years later, the central bank is close to committing the same mistake by the creation of the proposed smaller banks. Going by the draft guidelines of the RBI, the smaller banks will not be very different in mandate and operational scope compared with that of LABs.
The operations of smaller banks will “normally” be restricted to contiguous districts to give a “local feel” and culture. Any possibility of expanding the presence comes after a period of initial five years of stabilisation period. For initial three years, the smaller banks would require prior approval of the RBI. There is not much difference from LAB rules, except the fact that smaller banks can expand to districts in the adjoining states “if necessary”. But that’s a scenario one has to wait and watch to see whether it happens in reality. Now, the problem is that ........
Risk management courses may be made mandatory for senior PSU bank officials
Financial services secretary G.S. Sandhu said that the government is looking to make it mandatory for general mangers and deputy general managers in public sector unit (PSU) banks to do a course in risk management before taking up their post in light of the loan scams that have been exposed recently..............
PSU banks to have long-term CEOs, professional boards?
......... Former deputy governor KC Chakrbarti was the first to highlight the sharp difference in the asset quality between the private and public sector and had ascribed it to governance. Two of the key recommendations by the Nayak panel was to professionalise the management by distancing them from the influence of the finance ministry. A holding company structure was suggested as a means to achieve this. Secondly, it was also recommended that the post of chairman and CEO be separated and the boards have more accountability.........
Centre plans major banking reforms; SARFAESI Act to be amended
Two moves by the government will significantly impact India’s banking segment— a decision to amend the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002, during the Winter Session of Parliament to allow banks to take charge of companies that wilfully default on loan repayment and second, a plan to put in place a holding company structure for public sector banks........
Shorts and social issues
This is the second edition of YES! I am the change challenge. It is being conducted by YES foundation, the social development arm of YES Bank. It aims to inspire and empower youth to make five-minute-long social films........
Banks nudge customers to take e-way
.......“The cost of a net banking transaction is one-fifth of an ATM transaction and, for mobile banking, it is much lower. We are considering the implications of the RBI circular on our business models and will also be intimating our customers if there are any changes,” ...............
Not just bank accounts
.........Payment systems such as Airtel Money and Paypal, for example, address a market demand that bank accounts do not. Similarly, different consumers require different levels of insurance, and for different things. A one-size-fits-all approach through central planning does not address the complex suite of financial services that households require. In a marked difference from the past, .........
More than 50% panchayats in Bihar don't have banks
............Out of 8,463 panchayats in Bihar, 5,298 are yet to be covered with banking service, Finance minister Bijendra Prasad Yadav pointed out in the meeting of the State-Level Bankers' Committee (SLBC) here on Wednesday. The banks have been tasked to proceed with setting up branches in panchayats and achieve the target in a time-bound manner, Yadav said. Expressing frustration over the lethargic pace of financial inclusion in Bihar, he said that the banks' performance will be reviewed at the next SLBC meeting to be held in the next quarter and the state government would withdraw its money from under-performing banks...........
Obliging bank customers find themselves poorer by thousands
...........An unsuspecting Mr. Siddaraju obliged the caller by sharing his card details and even switched off his mobile phone for a couple of hours as per the caller’s advice to “facilitate speedy renewal” of his ATM card. Hours later, when he went to the ATM to check his account, he found that he had become poorer by Rs. 29,000 following a series of back-to-back online purchases.............
Banking frauds force finance ministry to take tough measures
......... “We are asking banks to be cautious about borrowers with high debt and too little equity. Banks have been asked to prepare a list of borrowers who are high on debt, and initiate the process of selling off their non-core assets. On the vigilance investigation on bankers, we will see to it that innocent bank officials are not taken to task so that procedural delays do not hamper sanction of credit.”........
Jaitley’s next challenge: Raft of loan scams could gum up the works for banks, corporates
......The common link to all these four stories is that we are heading towards a situation where the courts and the investigative agencies are going to get increasingly involved in probing banks, companies and even government decisions involving them. This is a situation tailor-made for another decision-making paralysis, this time at the banking and corporate ends. Bank finance is the lifeblood of an economy, and if bank managers are suddenly going to be looking over their shoulders and sitting on decisions for fear of the CBI or courts, there is going to be a huge lending freeze looming ahead. Neither the CBI nor courts are particularly well-equipped to judge financial sector decisions and could have a tendency to presume routine practices are scams when they may just be bad decisions. This is not to say there were no scams, but we need them to be probed by financial-literate investigators...............
HDFC Bank is India's most valuable brand: Report
Private sector lender HDFC Bank has been named as India's most valuable brand in the first ever BrandZ Top 50 Most Valuable Indian Brands ranking. Country's largest telecom operator Bharti Airtel stood at the second position in the ranking while State Bank of India ranked third in the study.........
The micro credit solution
..........Unless a concerted effort is made to increase the income-generating ability of the poor, the financial inclusion drive will not lead to any worthwhile outcome. The ability of the poor to run micro ventures to produce goods and services is not spread widely. To kick-start the process, ..........
Planning Commission, RIP
........With more money flowing directly to states, there is a greater need to track the efficacy of public spending, a role ideally suited for the panel or its Independent Evaluation Office. Before state and local governments are ready to spend money, a lot of capacity building also needs to be done to ensure those given more freedom are in a position to do something with it. Whatever shape the plan panel’s successor takes, it has to be ensured the new body does not remain as much a symbol of central oppression as its predecessor. While the plan panel had several redeeming features, it cannot be denied it has been used as a tool of favouritism over the years............
Acche din for the financially excluded or too much din?
........... Despite the efforts of the government and the Reserve Bank of India (RBI) over the past few decades, India's current state of financial inclusion is quite dismal, with approximately half the population outside the ambit of formal banking (a World Bank estimate is even lower showing that only 35.2 per cent adults have an account with a formal financial inclusion.) To accomplish the mission of full financial inclusion two major areas need a rethink.........
Is the rally in gold loan companies overdone?
......But cost-cutting can take a firm only so far. Customers have not come back in droves as expected once the RBI norms were eased, and gold assets under management have continuously declined. Yes, gold auctions will likely peter out now, but declining gold prices could act as dampener. Note that in the June quarter, Manappuram Finance reported a 4% decline in disbursements. Moreover, there is increasing competition from banks after the RBI removed a cap on the maximum ticket size on loans. In that context,..........
Wednesday, August 20, 2014
Does The RBI Need Restructuring?
RBI Governor Dr. Raghuram Rajan has proposed amendments to the RBI’s structure by making department clusters and creating the additional post of Chief Operating Officer. However, the employee unions have voiced their disapproval to the proposed restructuring plans. Harsha Subramaniam discusses Dr.Rajan's plans to restructure the RBI and the possible roadblocks with T.T. Ram Mohan - Professor at IIM-Ahmedabad...
Guv Listens to, Reassures RBI Staff, Reiterates Need for Rejig
...........“Our apprehensions were discussed at length,'' said Samir Ghosh, convenor of the United Forum of RBI Officers and Employees. “The governor was not rigid, and was open to dialogue. He said globally the scenario is changing and central banks all over the world are changing. There's a need to realign accordingly ,“ said Ghosh.“The governor said our apprehensions could be looked into and there can be further discussions. He even asked us to come back with a structured proposal,'' he added............
Read - ET
No outsider as RBI COO, guv assures staff
To assuage the fears of the employees about the Reserve Bank of India’s restructuring proposal, governor Raghuram Rajan along with the deputy governors assured them that no outsider would be appointed to the post of the chief operating officer (COO). Rajan on Tuesday assured the staff that any lateral hiring would be done on a contractual basis.........
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