RBI holds district-level quarterly meet

The Reserve Bank of India General Manager Vikram S Bajwa presided over the quarterly meeting of the District level review committee. The District advisory committee was held in the Punjab National Bank zonal training centre in Dehradun on Friday. Addressing senior bank officials,  Bajwa said that banks should work to further improve customer services and ensure their full contribution towards facilitating financial inclusion. He said that banking services should be provided through POS machine/BC module in villages with a population of more than 2,000 and Atal Adarsh villages.  The PNB circle head V.K.Srivastav, officials of various banks in the District, heads and representatives of different departments concerned were also among those present.  

India’s ATM market is set to grow more than three-fold by 2015

In 1987, HSBC set up the country’s first automated teller machine (ATM) in Mumbai’s Andheri East. Soon, almost all banks followed suit. By end March 2010, India had 59,737 ATMs. And the number is set to grow manifold in the future, too. There will be about 175,000 ATMs by 2015, according to the latest forecast by Retail Banking Research (RBR), a strategic research and consulting company based in the UK. That is an expected growth rate of 193 per cent in ATMs. And it is this lucrative prospect that makes the big two ATM vendors in the world — Diebold and NCR — drool. “We are pretty overwhelmed with the prospects for 2015. The installed ATM base is growing at more than 20 per cent year-on-year,” says Naresh Hosangady, South Asia vice-president and managing director of Diebold. “There are only 51 ATMs out here for a million heads,” points out Jaivinder Gill, who runs the show at NCR India. The comparative ATM numbers per million for Brazil, Russia and China are higher — 704, 536 and 155, respectively.  According to RBR, ATM growth in the first half of this decade was driven by private banks. State-run banks have since taken charge, with the State Bank of India and its eight associate banks leading the pack. The SBI Group set up 18,000 ATMs in the past seven years. Its share of installed ATM terminals went up from 32 per cent to 36 per cent during this period. The group created a world record in ATM shipments when it set up 10,000 terminals in 2009-10. It was the key reason why the share of state-run banks in ATMs now stands at 70 per cent, up from 50 per cent in 2003. Six others — private players such as ICICI Bank, HDFC Bank and Axis Bank, and the state-run Punjab National Bank, Union Bank of India and Canara Bank — have together set up more than 2,000 ATMs. They account for a combined market share of 34 per cent. ATM numbers will move up sharply.  “The places where you have ATMs are also going up. Take malls, for instance,” says Gill, referring to the retail boom — you have many more places to swipe when you shop, eat and play. Then you have debit cards, which are to reach 450 million by 2015, double the current base. Of course, it remains to be seen if point-of-sale swipes will mean that many less number of people will flock to ATMs. If so, it can technically act as a brake on ATM installations. But the counter point is that with cheque-truncation, ATMs are now more than just cash dispensers. The shared-ATM networks of banks have dramatically changed the story. Currently, there are five of them — the National Financial Switch (NFS), Cashnet, Cashtree, Mitr and BANCS. NFS is the leader. In March 2010, NFS had 56,711  ATMs of 38 banks — 95 per cent of the country’s ATMs were on it. And ATM usage got a huge boost when the Reserve Bank of India (RBI) asked banks not to charge cardholders of their rivals. Users can now make five free transactions a month on an ATM of other banks. You pay for more of such usage.         

MBGB branches placed under CBS

All the branches of Madhya Bihar Gramin Bank (MBGB) have been put under the central banking system ( CBS) and, therefore, all the customers of a particular branch of the bank have been linked to its all other branches.  MBGB chairman P N Singh said this on Thursday at a function held here to celebrate the foundation of the bank.  RBI Regional Director G Mahalingam inaugurated the cultural function. Singh also received a trophy and award for the best Gramin Bank from NABARD General Manager V Mohan Doss. He was also given a personal award for being the best chairman among all the chairmen of the various gramin banks in the state. Among others, Punjab National Bank General Manager V Sriniwasan also praised the performance of MBGB.

95% households in NE do not have access to banking – Shyamala Gopinath, Deputy Governor, RBI

Altogether 95 per cent households in North East do not have access to banking services against the national average of 43 per cent, RBI Deputy Governor Shyamala Gopinath said. "Despite efforts by RBI during the last 75 years, there are as many as 145 million households in the country not having access to banking", she said while speaking at the RBI's Financial Outreach camp at Karsingsa near. She said RBI has been launching such programmes in all the states of the region to extend banking services to every unbanked village. "Our institution has taken a conscious decision to bring the households into the banking fold which will not only result in making available the affordable banking services to everyone but will inculcate savings and investment habits among the people", she said.  "The challenge is enormous, but necessary, because financial inclusion is what will give people an opportunity to build better lives for themselves and their children", she added. Karsingsa, a village within the vicinity of the state's capital, having a population of over 2000 does not have banking facilities. The camp has served as a boon for the denizens as 203 No Frill Account (Zero Balance Account) with zero deposits were opened with SBI branches at Nirjuli and Naharlagun.

Central banks must respond in real time, says Subbarao

When Duvvuri Subbarao took charge as the twenty-second governor of the Reserve Bank of India (RBI) in September, 2008, he had to act swiftly to counter the impact of the global economic slowdown on the Indian economy.  Subbarao’s first eight months in office saw RBI reducing its repo rate six times and reverse repo rate four times, to support a slowing domestic economy. Repo rate was reduced 475 basis points and reverse repo rate 275 basis points during this period.  “When asked what he thought of the French Revolution, Mao Zedong had famously replied: It is too early to tell. People who take a long view of history, like Mao, take the position that it is just too soon to draw the lessons of the crisis,” Subbarao said on Friday in his welcome remarks at the start of the third PR Brahmananda Memorial Lecture by Stanley Fischer, governor of the Bank of Israel.  “Policy practitioners do not have the luxury of historians; they have to respond to unfolding developments in real time,” Subbarao added.  It appears that RBI’s efforts to pull the domestic economy out of slumber have succeeded, as India’s gross domestic product (GDP) growth is seen accelerating to 8.6 per cent in the current financial year. The country’s economy had expanded 8 per cent in 2009-10 and 6.8 per cent in 2008-09.  However, inflation appears to be playing the spoilsport, with the headline number climbing to 8.4 per cent in December, driven by high food prices. The central bank has also revised its inflation forecast for March to 7 per cent from 5.5 per cent earlier.  Rising prices have prompted RBI to raise its key policy rates seven times since March 2010. The repo rate has been raised 175 basis points to 6.5 per cent, while the reverse repo rate was raised 225 basis points to 5.5 per cent during this period. Things have become complicated, as the growth in India’s industrial output in December slid to a 20-month low of 1.6 per cent. Earlier this week, in Bhopal, Subbarao had admitted that balancing growth and inflation was a tough act.  “We want to set interest rates in a way that inflation can be contained without hampering the growth rate. But, this is not going to be an easy balancing act to resort to,” he had told reporters.  Most analysts reckon slow growth in industrial production is unlikely to convince RBI to keep rates unchanged in its next policy met, due on March 17, as inflation continues to remain a major concern.  “While there is a deceleration in growth, inflation is a bigger problem... we thus maintain our view of the RBI raising (rates) by an additional 50 basis points in 2011 and 2012,” Rohini Malkani and Anushka Shah, analysts with Citigroup Global Markets, said in a note.  Goldman Sachs expects RBI to increase rates 25 basis points in March and another 50 basis points in this calendar year. Some analysts, who did not wish to be named, however, said it was too early to take a long-term view on the direction of interest rates, with food inflation cooling to a seven-week low of 13 per cent for the week ended January 29 and growth in industrial production faltering.  A further slowdown in investment activities, coupled with easing food prices, might encourage RBI to take a pause before raising rates again, they said.  Subbarao, himself, believes that the central bank’s policy should take into consideration the present macroeconomic challenges.  “The central bankers were a triumphant lot in the years before the crisis.... The crisis then came as a serious blow to the credibility of central banks... the challenge for central banks, as indeed for all policy makers, is to learn the lessons of the crisis and reflect them in their policies,” Subbarao said. 

Cap likely on home loan pre-payment penalty

Home loan borrowers may get a piece of good news soon. Pre-payment penalties, which are 2 per cent or above of the outstanding loan for most banks at present, may be brought down to 0.5-1 per cent.  The Reserve Bank of India (RBI) is in talks with banks to bring down pre-payment penalty charges and has sought their views on how much the cap should be. People in the banking industry say a consensus has emerged among lenders that a penalty within 1 per cent of the outstanding loan will be feasible.  “There are two reasons why banks charge pre-payment penalty. First, from the asset-liability management perspective, when a bank lends for a longer tenure, it also needs to raise funds accordingly. So, there are liabilities to be paid off over a period of time. This becomes difficult when loans are paid before time. Second, in view of the administration and processing costs, banks may tend to charge less in the initial years in the hope that charging more in future would make up for it,” IDBI Bank Executive Director R K Bansal said.  The regulator’s objection to high charges is with respect to fair treatment to customers.

Lifting FDI curbs will help India trigger fund inflows: Locke

Reducing tariff and non-tariff barriers and lifting restrictions on foreign direct investment ( FDI )) could help India trigger fund inflows, crucial to help fix the country's creaking infrastructure, US Commerce Secretary Gary Locke said here Friday.  Earlier Friday, Locke met with the famed Dabbawalas of Mumbai and appreciated their management skills and strategising abilities.  Locke also met the Reserve Bank of India Governor D.Subbarao.

SBI's loan mela inaugurated by G.Mahalingam, Regional Director, RBI

A large number of prospective loan seekers thronged the SBI's three-day-long 'Vasant Rin Utsav' which was inaugurated by Reserve Bank of India's Regional Director G Mahalingam at S K Memorial Hall here on Friday.  After the inauguration, keys of six cars and sanction letters of five loans were given away to borrowers by the chief general manager, SBI, Jeevandas Narayan, who was present as chief guest.  The main attraction of the fair is 50 % concession in processing fee for car loans and 0.25% concession in interest rate from 37th month till the tenure of the home loans. About 12 car dealers and 20 builders have put up their stalls at the fair.

Star TV Talent Leadership and HR Awards at the World HRD Congress

Sandip Ghose, Regional Director, RBI, New Delhi distributing Star TV Talent Leadership and HR Awards at the World HRD Congress

RBI Governor holds talks with CS

Reserve Bank of India Governor D Subbarao and senior RBI officials held talks with the Chief Secretary Awani Vaish and senior officials of the State Government at Bhopal on Thursday. They expressed concern over the ratio reduction in loan deposit in tribal-dominated districts. It was informed at the meeting that there was 40 per cent depletion in loan deposit in eight tribal districts. The Reserve Bank of India Governor instructed the banks to come up with improvement in this regard. There should be 65 per cent loan deposit in the state and 40 per cent in tribal districts. The banks assured that they would extend the figure in next financial year. Welcoming the visit of Reserve Bank of India Governor to Madhya Pradesh, the Chief Secretary said that the regional office of Reserve Bank of India was working actively. The Reserve Bank of India Governor said that he was very much impressed with the State Government for designing joint agenda, which could not be seen in other States. At the meeting, the State Government drew the attention of the Reserve Bank of India Governor to State Government grant to set up hand held device, smart card and bio metric ATM by banks. Subbarao was informed that banking facility at the village more than 2000 population needed in Madhya Pradesh. Subbarao appreciated this initiative and said it would be decided only after positive results of financial audit in next financial year. E-kiosk is being used by State Bank of India that should be conducted by other banks too. The RBI Governor was apprised of education loan for the education of poor children under Government guarantee. Subbarao asked the banks to provide educational loan of Rs 4 lakh without guarantee so as to benefit maximum people. The security to banks was also discussed at the meeting. 

BOB opens its all Ladies staff Branch at Pune

Bank of Baroda has opened its all women staff branch at Sinhgad Road,Pune.The branch was inaugurated at the hands of Shri R K Bakshi,ED of Bank of Baroda,in the presence of Ms Kamala Rajan, CGM & Principal, College of Agriculture Banking, RBI, Pune. N Ramani,Corporate General Manager and C D Kalkar,GM-Maharashtra & Goa Zone of the Bank.Speaking on the occasion,R K Bakshi said that women are making mark in all walks of life and banking is no exception.He assured the customers that the branch will be providing advisory services to the customers in addition to normal banking products and services.

RBI again raps banks on teaser loans

The Reserve Bank of India (RBI) has once again expressed its discomfort over teaser loan rates and questioned banks’ business model for offering such schemes.  “Some banks are taking deposits at an interest rate of 9 per cent and giving long-term loans, especially home loans, at 8.5 per cent. I don’t know what type of accounting is needed to show that this is not a very profitable business,” RBI Deputy Governor K C Chakrabarty said, while addressing a seminar on International Financial Reporting Standards.  October, RBI had raised the standard provisioning requirement for teaser loans five-fold, to two per cent, to discourage banks from offering such schemes. Teaser loans are those which charge lower interest rates in the initial period and a higher one in later years. State Bank of India (SBI), the country’s largest bank, has been running such a scheme for the past two years. SBI tweaked the scheme following the increase in provisioning requirement. It has since written to RBI to exempt these from the requirement.    Its defense of the scheme is that it has helped the common man. SBI chairman O P Bhatt recently said, at the World Economic Forum in Davos, that almost 80 per cent of the home loans given by SBI were below Rs 10 lakh, which meant the ‘aam admi’ was being empowered. He said the bank had given home loans to nearly 300,000 people in India. “I am not fighting with RBI, but only clarifying. We only gave a discount on the rate for the first two to three years and the rate is higher than the cost of my funds. So, what is wrong in what SBI does?” Bhatt had said. However, the banking regulator believes such schemes expose banks to the risk of defaults in future, as the borrower might not be aware of the scale of increase in monthly installments as interest rates rise. Most lenders which had offered such home loan schemes had then withdrawn these, such as HDFC and ICICI banks, following the regulator’s expressed concern.   

Flexible inflation targeting best, says Bank of Israel Governor

Bank of Israel Governor and a former official of International Monetary Fund (IMF) Stanley Fischer has argued that "flexible inflation targeting is the best way of conducting money policy". "The tripartite set of goals of money policy set out in modern central bank laws provide the best understanding of what a central bank should try to achieve.  Among other issues a central bank should aim to maintain price stability, to support the other goals of economic policy, particularly growth and employment, so long as medium term price stability ­over the course of a year or two or even three ­is preserved, and to support and promote the stability and efficiency of the financial system," Fischer said while delivering the third PR Brahmananda Memorial Lecture on `Central Bank Lessons from the GlobalCrisis'.  "But 'flexible' does not mean that a country should not intervene in the foreign exchange market, or that the capital account should be completely open. Rather, it means that the country should not draw an exchange rate line in the sand and declare 'thus far, and no further'. Countries should not commit themselves to defending a particular exchange rate," he said.

RBI Board meets at Bhopal

The Central Board of the Reserve Bank of India met today in Bhopal. The meeting reviewed key economic, monetary and financial developments. Dr D. Subbarao, Governor, Reserve Bank of India chaired the meeting. Shri Y.H. Malegam, Prof. Suresh Tendulkar, Prof. U.R. Rao, Shri Lakshmi Chand, Shri H.P. Ranina, Smt. Shashi Rajagopalan, Shri Suresh Neotia, Dr. A. Vaidyanathan, Prof M. M. Sharma and Shri Sanjay Labroo were present at the meeting of the Central Board. Deputy Governors of the Reserve Bank, Smt. Shyamala Gopinath, Dr. K.C. Chakrabarty, Dr. Subir Gokarn and Shri Anand Sinha were also present.  The Central Board of Directors of the Reserve Bank meets at least once every quarter. The Board has scheduled meetings in Mumbai, Chennai and Kolkata each year. The post-budget meeting of the Board, traditionally held in New Delhi, is addressed by the Union Finance Minister. The other meetings of the Board are held in the remaining state capitals by rotation. The main function of the Central Board of the Reserve Bank is to provide overall direction to its affairs.  The Governor had a meeting today with the senior State Government and bank officials. The banks agreed to achieve a overall target of 65% CD ratio and target of 40% CD ratio in the 8 low CD ratio districts, mostly tribal by 2011-12. It was decided that a team of officers from Reserve Bank of India, Commercial Banks and State Government would  visit villages to make assessment of the work done, prepare a financial inclusion plan and ensure that by end of March 2012 all 2736 villages with population of above 2000 are covered in Madhya Pradesh. The banks may also draw up a special plan to include nearby villages below 2000 population. The State Government has also assured to include financial education in the curriculum of schools at higher secondary level by the academic year 2012-13. The other issues discussed at the meeting included higher credit flow for education loans, issues relating to urban co-operative banks and security of bank branches.   Earlier, on February 7 and 8, 2011, Dr. Subbarao visited Chhattisgarh. The Governor visited Khadma Village in Dharmatri district of Chhattisgarh for an outreach programme, where he interacted with the villagers, school children and SHGs, etc. The Governor called on the Chief Minister Dr. Raman Singh and discussed issues of mutual interest. Along with the Chief Minister, he laid the foundation stone of office building for RBI Office at Naya Raipur.  The Governor also interacted with students of IIM, Raipur. 

RBI Governor highlights five dilemmas in regulatory role

Reserve Bank of India (RBI) Governor D Subbarao and four Deputy Governors addressed a gathering of bankers in a meeting organised by Bankers' Club, Bhopal on Wednesday at Hotel Noor-us-Sabah Palace. Executive Director of Central Bank of India RK Dubey was also present on the occasion.  Speaking on the occasion, Subbarao highlighted the five dilemmas being faced by the RBI in its regulatory role. He also underlined the fact that unless the commercial banks, which are the conduit to implement various policy decisions, do not understand the underlying concerns, such policies will not be effective.  Elaborating on the five dilemmas, he stated that the first issue is how to balance the demands of growth and inflation management. Food inflation and commodity price inflation, as is well known, are the two main drivers of inflation. Changing food habits, especially in rural areas, due to increased consumption capacity, is causing structural inflation. Rise in commodity prices, such as oil, is resulting in commodity price inflation. Credit growth is another factor contributing to inflation. The challenge before the RBI is to balance the demands of growth and inflation, and ensure that the relevant policies result in expected outcomes. Deputy Governor Shyamala Gopinath explained the importance of financial stability reports which enable Reserve Bank of India to foresee different scenarios and undertake remedial measures. Developments in the recent past show that even in developed financial economies having well developed market, systemic risk is significantly higher than under adverse market conditions. Deputy Governor KC Chakrabarty exhorted banks to activate all their field controlling offices and branch offices so that banking facilities reach the entire population. At present, bank credit is not available to a majority of the population and almost a half of the population is bereft of banking services. Thus the need for activating the field units, Chakrabarty explained. Deputy Governor Subir Gokarn made an assessment of the state of the economy and the rapidly changing global environment. It is difficult to predict about emerging scenarios. Rising oil prices is causing greater concern. Deputy Governor Anand Sinha explained the need for collective behaviour of the system. He also underlined the need for bringing non-banking system under some kind of regulation, similar to the banking system. Executive Director of Central Bank of India RK Dubey spoke about the declining CD ratio in the State and pointed out that financial tie ups for big industrial units are mostly finalised outside the State and do not get reflected in the CD ratio of the State. 

Hope govt adopts fiscal consolidation plan: D Subbarao

The government should adopt a plan of fiscal consolidation in the coming financial year to April 2012 and beyond, the Reserve Bank of India Governor Duvvuri Subbarao said on Thursday. Subbarao's comments come just over two weeks before Finance Minister Pranab Mukherjee releases his budget for the next financial year on Feb. 28. Persistently high food prices have been a bugbear for the Reserve Bank. The central bank at its January 25 credit policy had warned of food inflation spilling over to the general inflation process as it raised the reverse repo and repo rates by 25 bps. Today, Governor D Subbarao has said that it is difficult to balance growth and inflation. Recent spurt in oil prices and the crisis in Egypt would add to India's domestic woes. Subbarao said, "Spurt in oil prices on Egypt crisis will hurt India," adding,"we have to be prepared for a further spurt in oil prices." He said structural rigidity and rising commodity prices are pushing inflation higher. He also does not see much movement in prices of wheat and rice, adding that it is difficult to say that the government's welfare schemes are feeding inflation. Food inflation eased in late January to just over 13% after having reached a one-year high of more than 18% on December 25, due to soaring prices of onions and potatoes.  The RBI chief also urged for a consolidation in the Indian banking system. He said it is up to banks to come forward with merger proposals. He added that the size of Indian banks was smaller compared to their global peers. His advice to banks was to "set interest rates in a way that they do not hurt growth." He further said that the central bank would evaluate the business models of applicants looking to setup new banks. The Malegam Committee had recently recommended a 24% interest rate cap on loans paid by microfinance institutions. He said he would meet representatives of states and MFIs to discuss the Malegam report and work out modalities to implement the panel's recommendations. He also revealed that plans are in the works to form a panel to study a slowdown in foreign direct investment. Subbarao said that the panel would suggest ways to encourage FDI.

RBI must understand factors responsible for decline in FDI: Subbarao

The Reserve Bank of India would conduct an internal study on practices responsible for the decline in the direct foreign investment (FDI) flows in the country. Talking to media in Bhopal after the meeting of the central board of Reserve Bank of India, Governor D. Subbarao said that RBI must understand the factors responsible for the decline in the FDI.

Bank unions suggest ‘Banking Ombudsman’ be changed to ‘Banking Lokpal’

Bank employee unions insist name of grievances cell should be easily understood by common citizens; also push for a special counter for senior citizens. A committee set up by the Reserve Bank of India (RBI) to look into the issues of customer services has agreed to change the name of the Banking Ombudsman to something simpler like the 'Banking Lokpal', which is less of a tongue-twister.  This suggestion was made by the Indian National Bank Employees' Federation (INBEF) to the committee headed by M Damodaran as many customers from rural areas were not familiar with the term ombudsman and would therefore not be forthcoming with their complaints on banking services to the department.   Subhash Sawant, general secretary, INBEF, said, "Many bank customers mainly from rural customers do not understand what ombudsman is all about. When we ask them to file a complaint with the ombudsman, they simply ask us, 'What is ombudsman?'  The Federation has also suggested that the number of offices of the banking ombudsman be increased. Currently there is only one office that is based in Mumbai and it covers mainly Maharashtra and Goa. It has also asked that a special counter should cater to senior citizens at the branches of all banks, during the first 10 days of every month, as the number of pensioners has increased sharply.  In its reply to IBNEF with respect to its suggestions, the committee said, "The title of the RBI Banking Ombudsman may be changed to a simpler, easily understandable one. The area of operations of the Ombudsman may also be enlarged." In a letter to the Federation the committee also said, "The number of pensioners is increasing. Special counters for pensioners may be considered especially during the first week of every month."   "The committee has agreed in principle to our recommendations. We welcome the response on the matter of senior citizens. About the matter of changing the name of the banking ombudsman, we will know when the report is out," Mr Sawant said.  Other bank unions were also represented along with the IBNEF at the meeting with the Damodaran committee which also discussed issues like clean currency notes, shortage of banking staff and banking-related security.

Panel to oversee Presidency faculty

The state government has formed a committee to oversee faculty recruitment at Presidency University to ensure quality. Former RBI governor Bimal Jalan, economist Amiya Bagchi, chairman of West Bengal Council for Higher Education, Subimal Sen and vice- chancellor of the university, Amita Chatterjee,  have been named by the state higher education department as members of the committee. Advertisements will be published in newspapers and applications invited from candidates across the country and abroad. "Presidency University has a long tradition of excellence. Every recruitment made will be done keeping in mind that this tradition has to be furthered," said state higher education secretary, Satish Tewari.

Unhappy about poor show, chief secy asks banks to set target

Unhappy with poor credit-deposit (CD) ratio in Jharkhand, chief secretary A K singh on Wednesday asked the bankers in the state to pull their socks up by setting monthly targets and conducting day-to-day monitoring. Singh's comments came at a time when the Reserve Bank of India is monitoring the financial inclusion drive of the banks all over the country. The chief secretary was addressing the 32nd state level bankers' committee (SLBC) meet on Wednesday. The chief secretary was irked to find that the CD ratio in the state by December 2010 was 43.99 per cent which was not only below the national benchmark of 60 per cent but also lower than the December 2009 figure of 45.22 per cent.