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Thursday, February 3, 2011
Shri Karuppasamy takes charge as New Executive Director at Reserve Bank of India
Shri S. Karuppasamy, assumed charge as Executive Director of the Reserve Bank of India today. As Executive Director, Shri Karuppasamy will look after Department of Expenditure and Budgetary Control, Department of Information Technology, Legal Department and Urban Banks Department. Shri Karuppasamy was Regional Director of the Reserve Bank’s Kolkata office prior to taking charge as Executive Director. Shri Karuppasamy has also headed two Central Office departments, namely, Department of Banking Supervision and Urban Banks Department. Joining the Reserve Bank of India in 1975, Shri Karuppasamy has worked in various departments in different capacities. These include, Issue Department, Department of Economic Analysis and Policy, Banking Department, Agricultural Credit Department, Rural Planning and Credit Department, Department of Banking Operations and Development and Urban Banks Department. He has also worked in various regional offices of the Reserve Bank. He has been a Member Faculty in College of Agricultural Banking, Pune and has also been the Principal of the Reserve Bank’s Staff Training College, Chennai. Shri Karuppasamy has also been associated with working groups in certain areas, such as, High Power Committee on Urban Cooperative Banks, Rating Framework for Urban Cooperative Banks, Cross Border Supervision and Integrated System of Alert. Shri Karuppasamy is a post graduate in Economics, is a Certified Associate of Indian Institute of Bankers, has a Post Graduate Diploma in Bank Management (NIBM) and is a Pragya. As Regional Director, Shri Karuppasamy was an RBI Nominee Director on the Board of Indian Bank.
Budget may have roadmap for new private banks
India is considering allowing new private sector banks, including those by industrial houses, and a roadmap for the same could be announced in the Union Budget to be presented later this month. While the formal and final guidelines regarding who should be allowed to set up new banks and what should be the terms and conditions would be announced by the Reserve Bank of India (RBI), a roadmap could be announced in the Budget speech on February 28 by Finance Minister Pranab Mukherjee, sources said. mong other options, RBI was considering the grant of licences to small banks for the initial few years, which could be upgraded to full-fledged banking licences after it was satisfied with their performance and the fulfillment of certain criteria, sources said. The guidelines would dwell upon issues like the minimum capital for new banks, the promoters’ contribution, minimum and maximum caps on the holding of promoters and others, foreign shareholding, business model and whether industrial houses and NBFCs (non-banking financial companies) could be allowed to run banks. Among others, a number of corporate houses, including Anil Ambani-led Reliance group, the Aditya Birla group and the Religare group, have expressed interest in obtaining banking licences. A number of NBFCs and micro-finance institutions are also said to be interested. RBI has said new licences were required since vast segments of population, especially underprivileged, still have no access to banking services.
Pvt banks should participate in inclusive banking: AIBOC
The All India Bank Officers' Confederation (AIBOC) has demanded that all banks including the new generation private sector banks and foreign banks need to participate in the inclusive banking process. It also called for upgradation of pension as and when salary revision takes place, medical facilities to the pensioners as in the case of chairman and managing directors (CMDs), provision of five-day week for the banking industry and regulated working hours for the bank officers. Addressing media persons here, G D Nadaf, general secretary, AIBOC said, “Presently, the working hours of bank officers are not regulated. We demand that their duty hours should be specified. Our confederation is opposed to mergers and acquisition in the banking industry and we demand more number of branches of public sector banks and also a commensurate addition in manpower.” The two-day business session of AIBOC began on January 30. The conference is expected to be attended by over 1500 delegates and observers from all over the country. The General Council of AIBOC will deliberate on the issues confronting the labour movement, threat to trade union rights and de-unionization. The AIBOC has alleged that continuous efforts are being made to dilute labour welfare measures as part of the globalization process of the economy and attacks are mounted on the trade unions in order to create a trade union free environment and throttle the voice of the workers
Paypal RBI Issue–Paypal Violated FEMA Act - RBI
RBI has issued a circular regarding the ongoing Paypal/RBI issue, and the following sentence sums the entire story. “It was observed that a few OPGSPs (Online Payment Gateway Service Providers ) have not only facilitated conclusion of the transactions but also allowed exporters to retain the export proceeds abroad without repatriation resulting in violation of the provisions of FEMA, 1999. Acknowledging however the importance of the services provided by the OPGSPs to the exporters, particularly in facilitating small value export transactions, it has been considered necessary to issue a set of guidelines to cover such e-commerce arrangements.”
Some microfinance policy considerations for the Reserve Bank of India beyond the Malegam committee report - Sasidhar Thumuluri
The ongoing microfinance regulatory policy formulation exercise should not be a missed opportunity. The resulting framework should enable greater financial inclusion and lead to a more integrated financial system. Mr. Yezdi Malegam and his high profile committee will adorn a special place in the annals of Indian microfinance. The report produced by this Reserve Bank of India (RBI) board committee is touted as a major milestone and some even called it a savior of the sinking sector. It has received as many accolades as criticisms. The microfinance community at large welcomed some key recommendations that would go a long way in offering much needed legitimacy to microfinance institutions (MFIs) and subject the industry to higher levels of accountability and disclosure standards. Serious concerns were however raised almost in unison with respect to provisions that could pose practical challenges of enforcement, stifle competition, raise entry barriers and limit customer choice. RBI is currently seeking public opinion on the report and will hopefully take these reactions into account before declaring the rules of the game. The purpose of this article is to offer some thoughts over and beyond Malegam committee’s work as the RBI prepares to formulate the policy framework that would define the future course of the sector. Given the time constraint and circumstances under which the committee delivered the report it has done a commendable job but, understandably, it had a limited mandate or opportunity to look into the issue more comprehensively. RBI should nevertheless consider long term implications while formulating the policy that would enable greater financial inclusion and lead to a stronger well integrated financial system. Same applies to the finance ministry which is about to table new microfinance bill in the parliament. Following suggestions may be considered in addition to the Malegam committee report and other expert opinions:
1. Include a wide spectrum of basic financial services in microfinance definition:
Poor people require access to all kinds of financial services just like everybody else. Thus far the emphasis has been on frequent cash flow income generation loans primarily offered through group mechanisms. Money is fungible and these loans tend to be diverted for consumption and asset building many a times in the absence of suitable loan products. A good policy environment should enable financial institutions to design and deliver customized products that fit varied financial needs of the target market. Hence it is important to recognize this fact and keep in mind credit requirement for other vital needs such as housing, agriculture, education, health, water & sanitation etc., as well as the unmet need for savings, remittances and insurance services while ascertaining the boundaries of microfinance regulation in order to effectively address the challenge of financial inclusion. Mobile banking promises great potential in achieving scale efficiently. Safely leveraging the ever expanding mobile phone network in credit delivery, insurance distribution and money transfers may also be explored.
2. Allow the establishment of small finance banks:
Raghuram Rajan committee on financial sector reforms made this recommendation back in 2008. This has also been a long standing demand of certain leading players involved in financial inclusion initiatives. Local Area Banks were a step in the right direction but met with limited success apparently due to lack of regulator’s interest in pursuing the idea further. More than 10 MFIs in the country manage over Rs. 500 crores each in assets with equity base of anywhere between Rs. 50 crores and Rs. 2000 crores. By allowing limited service small banks with minimum capital requirement of Rs. 50 crores would not only accelerate the provision of much needed savings services to the unbanked clientele but also significantly and sustainably reduce cost of funds, and improve operating efficiency for MFIs, in turn reducing borrowing rates for end-clients. Moreover, since the Malegam committee has made it loud and clear that MFIs must be supervised more closely by the RBI, small microfinance banks in addition to the committee recommended NBFC-MFIs would make a decent portfolio for the Reserve Bank to merit a separate supervision wing with adequate resources to enforce policies more effectively rather than by just adding a new category under NBFC group which may or may not have dedicated resources necessary to regulate the sector. On the top if it, RBI regulated “banks” enjoy greater credibility and are less likely to be subjected to knee-jerk political actions.
3. Allow NBFC MFIs to offer business correspondence services for commercial banks:
MFIs together deliver credit and, to a limited extent, insurance successfully to over 20 million households in India today, of which NBFC MFIs make up for roughly 85%. Those MFIs that would not qualify to be small banks (per the above suggestion) may be allowed to offer core banking services on behalf of commercial banks via business correspondence model. Given high potential for outreach through an extensive network of field force these MFIs make perfect partners for taking banks to the last mile. This would not only enable non-bank MFIs to offer savings and other banking services to the unbanked but also help enhance banks’ oversight on MFI activities.
4. Bring all sizable private microfinance activities under one umbrella:
Malegam committee apparently left out a large number of NGO MFIs and small NBFCs from the purview of its recommendations. If implemented the recommended framework would leave ample room for recurrence of situations like those led to the recent turmoil or create regulatory confusion at the least. It is important to define rules for all significant players through a common policy regime. At the same time it is also imperative to enable seamless transformation of small MFIs into large responsible entities. All privately owned MFIs that manage an asset base of more than Rs. 10 crores or serve more than 10,000 clients may not be allowed to operate as non-profits since it is in societal interest that financial business of sizable proportion be practiced under proper supervision, especially where majority clientele constitute vulnerable population. Beginning with a minimum capital requirement of Rs. 5 crores for newly transforming or start-up MFIs a timeline, say 3-5 years horizon, may be set for raising the capital base to Rs. 15 crores as recommended by the Malegam committee.
5. Promote public-private partnerships:
SHG-bank linkage program is a hugely successful government sponsored microcredit program that is aimed at making bank credit accessible to the poor. Public sector banks and state governments work together under NABARD’s support in making this subsidized credit program work. MFIs with their extensive outreach into the hinterlands could prove great partners in funding to and managing the credit risk of SHGs. At the behest of RBI and the central government, NABARD could consider lending directly to MFIs for on-lending to government sponsored SHGs that are unable to access bank credit. This will not only minimize the possibility of duplication of groups and multiple lending but also help build strong symbiotic relationship between state governments and MFIs, in turn avoiding some of the troubles that seem to have caused Andhra Pradesh government to act the way it did. Similar thought could be extended to other transactional services such as bill payments, government pensions, welfare payments etc., in a phased manner.
6. Extend tax breaks and special status to MFIs operating in remote and difficult terrains:
The objective of financial inclusion would only be fulfilled when basic financial services reach every corner of the country through legitimate means. Offering MFIs with tax breaks and special recognition for reaching out to remote and underserved areas could prove an effective strategy in deepening the financial access. Such recognition could mean having access to special credit lines from banks at below-market rates. Lower cost of funds and tax savings could in turn be useful in offsetting extra operating costs incurred in serving less accessible areas without significant negative impact on revenues and/or effective cost to the borrowers. This is the first time RBI has ever commissioned an intensive exercise on MFI regulation. Such opportunities do not come too often and should be best utilized. Policy frameworks of Philippines, Cambodia, Peru, Bolivia, Ghana, Kenya and Uganda could come handy as good reference points. These countries have been hailed for achieving some success in establishing progressive regulatory environments for microfinance. It is understood that implementation of some of the above suggestions would mean commitment of significant additional resources on the part of RBI and the government. The very task of making financial services available to roughly 50% of nation’s population that is unbanked is no simple matter either and an earnest investment in a robust regulatory oversight infrastructure sooner than later may not be a bad idea. - Sasidhar Thumuluri is a seasoned microfinance professional who keeps a close eye on the developments in India. He has studied the business of microfinance in over 30 countries and has a good grasp of its details. He is currently employed with Habitat for Humanity International in Washington DC and manages its global housing microfinance portfolio
Indian Banks form core team for microfinance loan restructuring
under the Indian Banks Association (IBA) bankers met recently to set up a core team of lenders to decide on the restructuring loans to micro-finance institutions (MFIs). The decision to restructure the MFI loans was taken after a few MFIs approached the banks for restructuring their loan portfolio. The Reserve Bank of India had also earlier permitted banks to restructure loans to MFI sectors even if they were not secured. In the first phase only 10 MFIs, including SKS Microfinance, Spandana Sphoorty, Asmita and Share Microfinance with operations in Andhra Pradesh, have been called for discussions. According to a banker, the restructuring of loans would be done on the basis of the “projected cash flows of the MFIs”, to be calculated and suggested by charted accountants. Banks can restructure a loan either by extending the time for repayment, by repayment holidays and by interest rates rebate.
Wednesday, February 2, 2011
Anand Sinha - Man Friday you can always count on
In Delhi’s North Block, which houses the finance ministry, bureaucrats there often say that central bankers are paid to be conservative. And that is a description which may well fit the new Deputy Governor of the Reserve Bank of India, Anand Sinha. The career central banker has straightway been assigned the charge of the Department of Banking Operations and Development which handles banking licences. That is in keeping with his core competence on this front and banking supervision. A former boss of his says Mr Sinha was admired most for his ability to think originally on many issues. This has also earned him respect in global banking circles. He is well versed in finer details of new prudential and supervision norms, also known as the Basel III norms, which are currently being debated globally among central banks. Mr Sinha has been involved in drafting and formulation of several major regulatory and supervisory policies for commercial banks. And that includes draft guidelines in the making on licensing new private banks, besides the policy paper on the entry of foreign banks. Mr Sinha has had vast global as well as local exposure. He represented India and the RBI on several international committees. He was Reserve Bank of India’s alternative representative on the Basel Committee on Banking Supervision (BCBS), Bank for International Settlements (BIS), Basel, Switzerland, and was also on various sub-committees. Besides, he was also a nominee of the RBI on the boards of several state-run banks. Commercial bankers view him a little differently. In his interaction with bankers, they say, he talks less and listens more and comes across as a die-hard central banker who reckons that the regulator is always right. They do acknowledge his in-depth knowledge not only of prudential accounting norms, Basel II and III, but also his knowledge relating to the new financial accounting norms such as the international financial reporting standards or the IFRS. There are others who say he is very theoretical in his approach, lacking the pragmatism of his predecessor who despite being a central banker was open to change — a quality which is seen as crucial in the changing financial environment as Indian markets integrate with global markets. His colleagues on Mint Street too acknowledge his cautious approach. According to bankers, Sinha’s personality is in sharp contrast to that of his fellow Deputy Governor, K.C.Chakrabarty, who is known to speak his mind even beyond the confines of the RBI headquarters in Mumbai. A voracious reader in his free time, Mr Sinha is said to prefer reading serious academic books on banking regulation and supervision. He is known to be the ‘Man Friday’ of the bosses and a boss whom his juniors can depend on, as he is not one who is imposing. An IIT alumnus — a masters in Physics from IIT Delhi — solving mathematical puzzles is a stress buster for Mr Sinha. That is something he may have to reach out for more over the next two years.
Banks’ interest rates on deposits, lending go up again
Barely a week after Reserve Bank of India (RBI) raised key policy rates by 25 basis points and asked banks to restrain lending and promote deposit growth, a slew of commercial banks have begun by increasing their benchmark lending rates and deposit rates. As many as six PSU banks announced hike in base rates, benchmark prime lending rate and deposit rates by 25-50 basis points across various maturities. Bank of India increased its Base Rate (BR) from existing 9.00 per cent to 9.50 per cent a year and Benchmark Prime Lending Rate (BPLR) from existing 13.25 per cent to 13.75 per cent per annum. Dena Bank increased its BR by 50 basis points from 8.95 to 9.45 per cent. Two others Oriental Bank of Commerce and Indian Bank hiked deposit and lending rates by 50 basis points, while Indian Overseas Bank raised its base rate from 9 per cent to 9.5 per cent. Oriental Bank has also revised its deposit rates by 25-50 bps across various maturities. Bank of Baroda revised its rates of interest payable on term deposits by 25 bps.
Credit card complaints top list of grievances: RBI Ombudsman
Credit card grievances relating to overcharging and issuance of unsolicited cards accounted for bulk of the complaints received by the banking ombudsman during 2009-10. The banking ombudsman has received 18,810 credit card complaints, which accounted for 24 per cent of the total grievances received during 2009-10, data released by the Reserve Bank of India (RBI) showed. The number of complaints has been increasing year-on-year basis. In 2008-09, the ombudsman received 17,648 complaints, while it stood at 10,129 in 2007-08. The RBI had launched the banking ombudsman scheme in 2005 to redress grievances of customers. "A general source of these complaints continues to be the difficulty in accessing the credit card issuers and the poor response from the call centres. Simply put, this is the issue of non-transparency and mis-selling," the RBI said. The types of card-related complaints consists of items like issuance of unsolicited credit cards and recovery of premium charges, charging of annual fee in spite of being offered as 'free' card, it said. The ombudsman also received credit card complaints for disputes over wrong billing, abusive calls, excessive charges, wrong debits to account, non-dispensation of money from ATM, among others. "Complaints relating to credit cards (comprising 24 per cent of the total complaints in 2009-10 as compared to 25.5 per cent in 2008-09) show a declining trend this year," the RBI said. The credit card complaints also include complaints related to debit cards and ATM cards also. The ombudsman has also received complaints relating to failure on commitments made by banks, which include delay in providing banking facilities. The ombudsman received 11,569 complaints for failure to meeting commitments during 2009-10, which was 15 per cent of the total complaints received. "This points to the lack of sensitivity, transparency... As these complaints mostly relate to basic banking facilities, banks need to address these issues on priority basis without any demur," the RBI said. Further, it has also received 6,612 complaints related to loans and advance, 1,609 complaints against direct selling agents or recovery agents. In total during 2009-10, the ombudsman has received 79,266 complaints, higher than 69,117 received in the previous year.
RBI wants escrow accounts to protect home buyers
Is your property developer delaying construction or possibly using your booking amount or funds from banks for purposes other than building? Help could be at hand with a new measures proposed by the Reserve Bank of India (RBI), which has advised commercial banks to create escrow accounts to ensure transparency. Sources in public sector banks told HT that the RBI had taken steps to push for escrow accounts following recent instances of abuse of money meant for home building in the home loan finance scam. The money was channelised for other activities. An escrow is an account held by a lender or neutral third party into which either a homeowner pays money or deposits assets. In the case of real estate purchases, the escrow is created by a tripartite agreement between the developer, the banker and the home buyer and the amount needed to complete the project is calibrated with the progress of construction. Several banks including HDFC and Punjab National Bank have started directing funds to certain real estate projects through escrow accounts.
RBI rejects Karnataka banks' plea on coffee loans
The Reserve Bank of India has not ‘favourably' considered the Karnataka-based banks' request for retention of asset classification status of Coffee Debt Relief Package (CDRP) loans as on June 30, 2009, said a top regional official of RBI at the State-Level Bankers' Committee (SLBC) – Karnataka meeting held on Monday. Mr P. Vijaya Bhaskar, Regional Director, Reserve Bank of India, Bangalore, informed bankers at the 115 {+t} {+h} SLBC meeting that the RBI was not able to ‘favourably consider' their request since asset reclassification cannot be considered on a retrospective basis. Banks in Karnataka have an exposure of about Rs 1,400 crore to coffee growers in the State. According to bankers, such a step would lead to the increase in the level of NPAs under coffee loans, and that banks would have to make provision for these loans. Besides, they would also now have to provide for extra provisioning in addition to normal provisioning for diminution of fair value in case of restructured NPAs.
MFI law could be stalled
The proposed Microfinance Bill may not see the light of day, as the finance ministry is having second thoughts on coming out with legislation to regulate the sector. This comes in the backdrop of recommendations by the Malegam committee, which said the Bill would cover only about 8 per cent of the outstanding microfinance loan portfolio. “Our Bill is looking at only 8 per cent of the lending industry. We are yet to take a decision on whether it should be introduced. But if there is a Bill, it will be in harmony with the central bank’s regulations,” a finance ministry official, who did not wish to be identified, told Business Standard. He said the ministry would take a final call on this after the Reserve Bank of India (RBI) decided on the Malegam report. The committee, constituted by RBI to look into various issues related to microfinance institutions (MFIs), has said that 58 per cent of the outstanding loan portfolio in the sector is owned by the self-help groups- bank linkage model and 34 per cent by designated non-banking finance companies-microfinance institutions (NBFC-MFIs). Both banks and NBFCs are outside the scope of the proposed Act and regulated by RBI. Organisations not regulated by RBI account for only 8 per cent of the loan portfolio. Since cooperative societies, which give members voting rights, are excluded from the provisions of the proposed legislation, this percentage may be even lower, the committee said. While the committee, headed by Y H Malegam, a senior member of RBI’s central board of directors, largely agreed that the entities not governed by the central bank should come under the Microfinance Bill to eliminate regulatory gaps, a member of the panel, Shashi Rajagopalan, disagreed.
'Banks need to strike a balance between loans & deposits'
At the morning meeting with bankers before announcing the January monetary policy, RBI governor Duvvuri Subbarao had a few simple, curt messages to the CEOs. Increase deposits and go slow on loans, or else be prepared to face the music. His concern stemmed from a number derived from FY11 9-month data submitted by banks. It said that incremental credit-deposit ratio of the banking industry was more than 100%. Simply put, it meant that banks gave more loans than deposits received during the period. As loans outstripped deposits, banks borrowed overnight and short-term money from RBI and money market to lend. It was a risk, Mr Subbarao felt, they should not be taking. The central bank rarely spells out its concerns in too many words. But bank chiefs were quick to sense what's expected of them. RBI thinks that banks, largely to preserve their profits, have been slow in raising interest on deposits which reflects their cost of funds. As they dragged their feet, there was a growing mismatch in bank books which was not immediately visible to shareholders, many of whom felt that a lower fund cost meant great business sense. But the banking system was slowly exposing itself to a risk that disturbed Mr Subbarao. As banks kept interest rates low, savers moved money to other avenues like small savings where it gets locked for a long time. RBI has partly blamed banks for the liquidity crunch which is roughly measured by the amount that banks borrow daily from it; that number for many months has been around Rs 1 lakh crore. Money so borrowed was cheaper than deposits, but it was short-term money that went to fund longer duration loans. In the financial year to December, bank credit rose 16% while deposits moved up by 10%. RBI Deputy Governor Subir Gokarn was forthright when ET reporters met him. "We have articulated our belief that this is not an individual bank's issue... the disparity across banks leads to some sense of risk of instability and ultimately, it's the question of how credit is being financed by overnight borrowing from the repo window. It's not sustainable," he said. What also worried RBI was the widening gap between the average tenure of loans and deposits. "On the one hand, the maturity of deposits has come down substantially - more than 70% of these are of around two years. But on the lending side, if you consider infrastructure, it needs financing for a longer term," pointed out Anand Sinha , Deputy Governor, RBI.
Banks must accept 25p coins till June
The Reserve Bank of India has asked state-run banks and some private lenders to accept 25 paise coins for exchange until end-June 2011. The humble 25 paise coin represent 'four annas' of a bygone era will soon be history. The RBI has said that coins with a denomination of 25 paise and below will be pulled out of circulation by June 2011 after which they will cease to be legal tender. Raging inflation has reduced the monetary value to such an extent that it will not buy even the cheapest lozenge. Also, the cost of minting these coins is higher than their value because of which they are no longer minted. Although many traders already refuse to accept payments in small change below 50 paise, these coins are currently legal tender and it is an offence to refuse them. The RBI has for some time now been working on a strategy for the reverse flow of coins from circulation before withdrawing them as legal tender. Having now put in place a process, the RBI has asked 45 banks, including all government-owned banks, which maintain small coin depots to arrange for exchange of coins. The general public can exchange small denomination coins at any branch of these banks. The government had earlier under Section15A of the Coinage Act, 1906 decided to withdraw the coins of denomination of 25 paise and below from circulation with effect from June 30, 2011. From this date, these coins shall cease to be legal tender for payment as well as on account. Some time back, the RBI had recommended that the government should withdraw coins below 50 paise. The central bank had also asked for coinization of low-denomination notes of up to Rs 10 since these are high velocity notes and have to be replaced very frequently.
Tuesday, February 1, 2011
RBI shuffles top deck
Following Anand Sinha’s elevation as Reserve Bank of India (RBI) Deputy Governor, S Karuppasamy has been promoted as Executive Director to fill the vacancy. Prior to this, Karuppasamy was the Regional Director (Kolkata). Now, he will look after the Department of Expenditure and Budgetary Control, besides Information Technology, Urban Banks and Legal affairs. Mint Road sources said the Legal Department had been brought under an ED after a long time. Earlier, it was directly being looked after by a Deputy Governor. Earlier this month, V K Sharma, the senior-most ED, was relieved from the Department of Urban Banks, while the Department of Information Technology had no ED earlier. Sources said the Department of Banking Operations and Development, that of Payments and Settlement and the Financial Stability Unit would have no ED as of now. The Chief General Managers of these three departments will directly report to their respective Deputy Governors. As an Executive Director, Anand Sinha was looking after Banking Operations and Development, Financial Stability and the Department of Expenditure and Budgetary Control. Karuppasamy, the senior-most among Chief General Managers, was interviewed in November by a search panel comprising the Governor and Deputy Governors. He has three years of service left and is to retire in January 2014. To be eligible for the post of ED, a Chief General Manager should have three years of residual service. The retirement age for all RBI employees is 60. The central bank, which has seven EDs, will see one more vacancy in February, with C Krishnan’s term coming to an end. Interviews were conducted last week to find a replacement. R Gandhi, a Chief General Manager looking after the Department of Currency Management, and P Vijaya Bhaskar, Regional Director (Bangalore), had appeared for the interview. The chief executive officer’s post in the Deposit Insurance and Credit Guarantee Corporation (DICGC) – a wholly owned subsidiary of RBI – has been lying vacant since October 31 after H N Prasad’s retirement. For the past few years, DICGC has been headed by an ED-rank officer. In May, Deputy Governor Shyamala Gopinath will retire. She will be replaced by an ED.
Reserve Bank of India goes digital
The Reserve Bank of India is looking to clear its offices from the heavy paper-load and digitise all the documents lying in its various offices. The move could be a humongous exercise as RBI is looking at digitisation of approximately 30 lakh paper documents and it might take more than a year to complete the task. However, once complete, the exercise could help the RBI to a great extent in its day-to-day operations as a full digitisation of its entire archive of documents would cut down heavily on the time taken in finding the relevant documents for any of its future actions. Going paper-less has already become a trend in the banking sector with banks encouraging their customers to opt for email account statements, instead of the traditional paper documents.To meet its digitisation goal, RBI has sought requests for proposals (RFPs) till February 11 from the entities capable of digitising the paper documents at all its offices. The RBI also held a pre-bid meeting on January 28 to explain the queries raised by potential bidders who would be required to first digitise the paper documents, provide training to the staff and also supply the required software and hardware products to meet the digitisation goal. The RBI told the potential bidders that approximately 10,000 pages would be required to be scanned per day and the exercise could involve digitisation of approximately 30 lakh documents.
Top bankers speak at Banking Summit 2011 organised by JIM Noida
Jaipuria Institute of Management, Noida recently organized Banking Summit 2011. The theme of the summit was 'Banking in India: Issues and Challenges'. The summit successfully provided a one to one interactive platform to MBA students who shared their doubts and fears with renowned Banking industry leaders. Jaipuria Institute of Management, Noida recently organized Banking Summit 2011. The theme of the summit was ‘Banking in India: Issues and Challenges’. The Summit was launched by the top level personalities of the Banking Industry and the academia. The program commenced with lighting of the lamp by Mr. Sandip Ghose, Regional Director, RBI; Dr. Anup K Singh, Director, JIM Noida and Dr. JD Singh, Director General, Jaipuria Institute of Management. The summit successfully provided a one to one interactive platform to MBA students who shared their doubts and fears with renowned Banking industry leaders. The esteemed industry leaders shared their thoughts and experiences with the keen management students. The keynote speakers for the inaugural session were Mr. Sandeep Ghose (Regional Director, RBI), Mr. Ranjan Dhawan (Chief General Manager, PNB, New Delhi), Mr. R. C. Khurana (General Manager, Bank of India, New Delhi) , Mr. Sunil Pant (Chief General Manager, State Bank of India, New Delhi) , Mr. Rajnish Kataria (Director, National School of Banking Studies and Corporate Management ), Mr. S. C. Sinha (Executive Director, Oriental Bank of Commerce, New Delhi). The session was inaugurated by Mr. Sandip Ghose, Regional Director, RBI. According to Mr. Ghose, the two challenges that lie in future for the banking sector in India are: Human Resources Management and Financial inclusion. “The banking sector will have a great shortage of human resources in future as there will be a huge number of retirements within the next 5 years,” said Mr. Ghose. He asked all the budding managers to “put on their learning hats” and sharpen their reading, writing, speaking and listening skills to gear up for a banking job.
India's reserves more vulnerable to reversal of capital: Subbarao
‘Move towards capital account convertibility will be gradual’. India’s foreign exchange reserves are more vulnerable to reversal of capital inflows as compared to countries with current account surpluses, Reserve Bank of India (RBI) Governor Duvvuri Subbarao said on Monday. “Our reserves comprise essentially borrowed resources, and we are therefore more vulnerable to sudden stops and reversals as compared with countries with current account surpluses,” Subbarao said in a speech at the Special Governors’ Meet in Japan. Subbarao said it was important to distinguish between countries whose reserves were a consequence of current account surpluses and countries with current account deficits whose reserves were a result of capital inflows in excess of their absorptive capacity. In the third quarter review of the monetary policy, RBI had expressed discomfort over financing the current account gap with short-term capital inflows. As a source of funding the current account gap, FIIs posed a threat due to their unsustainable nature, RBI said. India’s current account deficit hit an all time high of $15.8 billion in July-September. Subbarao said capital account convertibility was not a standalone objective and the move towards it should be gradual. “India has followed a consistent policy on allowing capital inflows in general and on capital account management in particular. Our position is that capital account convertibility is not a standalone objective but a means for higher and stable growth. We believe our economy should traverse towards capital convertibility along a gradual path — the path itself being recalibrated on a dynamic basis in response to domestic and global developments,” he said. “Historically, we have used policy levers on the debt side of the flows to manage volatility. Contrary to popular perception, we have used both quantity and price=based variables to moderate debt flows,” he said.
Rs 250,000 cr bulk deposits up for renewal, rates may be hiked
Interest rates on bulk deposits are expected to shoot up as about Rs 250,000 crore of bulk deposits, out of a total Rs 5,000,000 crore in the system, come up for repricing during this quarter. Banks are vying with each other to widen their deposit base after the Reserve Bank of India (RBI) warned them not to fund credit through the repo window or the call money market. The problem will be aggravated further in the March quarter, when there is a 30 per cent to 40 per cent higher concentration of fixed deposits, as banks contract a higher amount of deposits to show a higher topline growth. About Rs 180,000 crore of bulk deposits mature every month, according to treasury heads of leading banks. A bulk deposit is any deposit over Rs 1 crore. K.R.Kamath, CMD of Punjab National Bank, said the bulk deposits form about 22.43 per cent of their deposit base. “The rates on these deposits could go up if there is a good credit demand in the fourth quarter. We do not have a bunching of bulk deposits, every month we have a portion maturing,” said Kamath. A senior SBI official who deals with revenue and resource management said the total deposits of the banking system is estimated to be around Rs 5,000,000 crore, which includes the current accounts, savings account, retail term deposits and bulk deposits. “About 35 per cent of this is Casa and the remaining Rs 3,250,000 crore are term deposit of which bulk deposits would be Rs 2,275,000 crore. Term deposits are spread out in the 12 months of the year, which works out to roughly about Rs 180,000 crore maturing every month,” said the official.
MFIs want 12-18 months to comply with rate cap
Small and mid-sized microfinance institutions (MFIs) are likely to seek more time to comply with the recommendations of the Malegam Committee report. The institutions plan make a representation to the regulator through the Micro Finance Institution Network (MFIN), asking for at least 12-18 months to bring down their interest rates to 24 per cent. Smaller MFIs charge 31-50 per cent. The Reserve Bank of India (RBI) has said that it will take a decision on implementing the recommendations by the end of March. The committee has suggested that if its recommendations are accepted, they should be implemented by April.
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