London, Mar 12 (PTI) To strenghthen trade and investment relationship between both the countries, Britain''s Minister of State for Trade and Investment Lord Stephen Green will be visiting India on a five-day tour from March 14.The Minister will call on the Governor of the Reserve Bank of India D.Subbarao and meet a range of business leaders such as Mahindra Group chief Anand Mahindra, Tata group chairman Ratan Tata and ICICI Bank chief executive Chanda Kochhar.
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Saturday, March 12, 2011
Fake currency to the tune of Rs 87,600 seized this year
New Delhi, Mar 11 (PTI) The government today said fake currency of face value of Rs 87,600 was seized this year till March 4 by various agencies. In 2010, fake currency of face value Rs 10.1 crore was seized by various government agencies against Rs 8.8 crore in 2009, Minister of State for Finance Namo Narain Meena said in a written reply to the Lok Sabha. Replying to another question, Meena said, "Reserve Bank of India has reported that they had recently undertaken quick scrutiny in some banks to examine if the reasons for corruption could be attributed to systemic issue i.e. risk to the system independent of the bribery case and if absence of proper internal controls had provided opportunities for bribery." Further, he said that acting upon the media reports that appeared in November 2010, regarding arrest of LIC Housing Finance CEO and some other persons in connection with allegation of receiving illegal gratification by senior officers of some public sector banks and financial institutions for sanctioning loans, RBI conducted scrutiny. RBI undertook scrutiny of borrowable accounts of the groups of Punjab National Bank, Central Bank of India and Bank of India, which were stated to be under scanner of Central Bureau of Investigation, he said. The outcome of the preliminary scrutiny did not reveal any systemic risk and lacuna in the loan sanctioning system and the relevant internal control system of serious nature requiring immediate supervisory or regulatory interventions, he said.
RBI asks US firm Zoha to close India biz
The Reserve Bank of India (RBI) today asked the US-based money transfer firm Zoha Inc to immediately wind up its operations in India. "The RBI has asked Zoha Inc, USA to wind up their existing services for cross border money transfer to India with immediate effect," the RBI said in a statement. The central bank, which has refused to grant authorisation to Zoha Inc, said the firm should not operate payment system for cross-border in-bound money transfer services in India. The RBI, however, did not give any reason for refusing authorisation to the money transfer firm. The central bank has refused authorisation application of Zoha Inc, exercising the powers conferred on the Reserve Bank under sub-section 3 of Section 7 of the Payment and Settlement Systems Act, 2007, the statement added.
Chaudhuri only nominee for SBI chief: Source
Pratip Chaudhuri, deputy managing director of State Bank of India (SBI), was the only person nominated to become chairman of the nation’s largest lender, a finance ministry official with knowledge of the matter said. His name has been proposed to the appointment committee of the cabinet, which will make a decision in the last week of March, the person said. Om Prakash Bhatt, chairman of SBI, will retire at the end of this month. The search committee that recommended Chaudhuri included RBI governor D Subbarao and former banking secretary R Gopalan, the person said.
Friday, March 11, 2011
RBI in growth-inflation fix
The Reserve Bank of India is facing the challenge of raising policy rates, while at the same time keeping them low, as balancing inflation and growth remains a key concern for the central bank, Governor D Subbarao said on Thursday. "For inflation management, we have to raise policy interest rates. For protecting, promoting and preserving recovery, we need to keep interest rates low, so there is a tension between raising policy interest rate and keeping them low," Mr Subbarao said at the convocation address of the National Institute of Bank Management in Pune. The statement assumes significance as RBI is scheduled to release its mid-quarter monetary policy review on March 17, where it is widely expected to hike interest rates again. "Growth-inflation dynamics - we are struggling with that. We recovered from the crisis sooner than other countries. Inflation also caught up with us sooner than other countries," Mr Subbarao said. The government data released on Thursday shows food inflation for the week to February 26 slowed to a three-month low of 9.52% growth year-on-year due to increased supplies of vegetables. This compares with a 10.39% increase in the previous week. According to RBI estimates, India's economy is likely to grow at 8.5% with an upward bias in the year ending March 31. "There are many arguments for keeping rates low or raising rates and that's what we are struggling with," he said. Reacting to the latest inflation figures, chief economic advisor to the finance ministry Kaushik Basu said India is likely to end the current fiscal with headline inflation close to 7% and the central bank will continue with its policy focus of containing inflation. In January, the central bank in its third quarter monetary policy review had revised inflation target to 7% for the year ending March 2011. India's wholesale price index-based inflation has remained well above RBI's perceived comfort level of 4-5% for more than a year, prompting the central bank to hike its key rates - repo and reverse repo - seven times by 175 basis points since March 2010 to tame soaring prices. "Inflation coming down is good news, but not unexpected. Overall WPI has been higher than anticipated. However, the direction in which the WPI is moving is also the direction in which we would like it to move. I do expect the year to close not below 7%, but very close to 7%," Mr Basu said. "Because it took longer for inflation to come down, it is clear that our efforts, policy initiatives to bring down inflation will continue into a couple of months in the new fiscal year," he added. In India, the popular inflation benchmark is the movement in the WPI. While the overall WPI movement is released at a monthly interval, inflation in primary articles such as food and fuel is released weekly.
Food inflation will come down to 7 pc: Kaushik Basu
PUNE: The downward trend in food inflation which has attained single digit now, would continue and touch seven per cent shortly, Chief Economic Adviser to Ministry of Finance , Kaushik Basu said today. "Inflation has come down substantially and I expect it to fall quickly in another two months," he told reporters noting that food inflation figure which was earlier above ten per cent, had been reduced to 9.52 per cent now. "It is not unexpected. What we had anticipated is happening", Basu said adding that the November-December (2010) inflation movement was considered temporary. By the end of fiscal, the inflation figure could be pegged at seven per cent, he said. Basu was here to attend the convocation ceremony at National Institute of Bank Management ( NIBM )) where he shared dais with the RBI governor Subbarao. Basu also observed that the growth estimate this year at 8.6 per cent would remain "intact". In his address, Subbarao said translating growth into poverty reduction was important and one of the challenges faced by the banking sector in India was that of "financial inclusion". "Banks have to increase their efficiency and reach out to remote areas and the poor", he added. The RBI governor also asked banks to find innovative ways to enable themselves to bear the burden of increased investment in the infrastructure sector envisaged in the next five year plan, to the tune of dollars one trillion. "Much of this burden will fall on the banking sector", he noted.
Regulatory body sought to check illegal financial firms
Agartala, March 10 (IANS) The Left Front government in Tripura Thursday urged the central government and the Reserve Bank of India (RBI) to constitute a regulatory body and form a national policy to check the spurt of illegal non-banking firms. 'Large number of unauthorised Non-Banking Financial Companies (NBFCs) and Un-Incorporated Bodies (UIBs) have been collecting money, alluring people with assurances of very high returns and cheating the innocent depositors,' Tripura Finance Minister Badal Chaudhury said. 'In order to monitor and supervise funding of these NBFCs and UIBs, there is a need to put in place a regulatory body at national level with its official arm extending up to state level,' said Chaudhury, after presenting a tax-free Rs.6,859.45 crore budget for the 2011-2012 fiscal with a deficit of Rs.246.58 crore. Unauthorised NBFCs have mushroomed in the northeastern region in recent years. These organisations take deposits from people by promising abnormally high rates of interest from 25 to 30 percent. After collecting the money, they shut down their operations and leave the area. The NBFCs not recognised by the RBI, the Insurance Regulatory Development Authority (IRDA) or the Securities and Exchange Board of India (SEBI) cannot do any monetary business or take deposits from people. The Tripura government, during the ongoing budget session of the state assembly, moved a new bill amending the Tripura Protection of Interest of Depositors (in financial establishments) Act, 2000 for enhancing the level of protection of the depositors in monetary firms, including NBFCs and UIBs, by providing more teeth to the existing legislation. The new bill proposed to impose a fine of Rs.10,000 for every flawed provision and act by the NBFCs and UIBs and in addition Rs.1,000 per day for continuation from the date of default. 'The RBI would soon open branches in many northeastern states and that would help to deal with these unscrupulous NBFCs and UIBs,' Chaudhury said after presenting the state budget.
Pact with RBI a win-win situation for JK Bank, Govt, people’
Jammu, Mar 10: Dispelling “apprehensions” on J&K’s agreement with Reserve Bank of India for Ways and Means, Minister for Finance, A R Rather today said the Cash Management Agreement is a reform measures which is in the overall interest and benefit of the people, depositors, J&K Bank and the government. Reiterating that J&K Government’s ties with the J&K Bank are and will remain intact, the Finance Minister said that the outstanding Over Draft amount of Rs. 2300 crore would be paid to the J&K Bank very soon in totality out of which Rs 1300 crore stands already paid. Maintaining that the state government’s Ways and Means Advance arrangement with the Reserve Bank of India (RBI) is a win-win situation for the State Government, J&K Bank, and people of J-K, Rather thanked the 13th Finance Commission for coming to the rescue of the State Government by agreeing to provide one time grant to wipe out OD outstanding which had assumed the shape of structured deficit. He reiterated that “the J&K Bank has been the banker to the State Government since long and it will continue to be so in the future also” and as Agency Bank appointed by RBI for the State Government for the new arrangements of Ways and Means. Replying to a question about the reasons behind the astronomical OD liability, Rather said that the successive governments after 2002 did not care about the repayment to the J&K Bank OD amount with the result “the OD outstanding has been there for last many years. When the National Conference demitted office on 10th October, 2002 the OD from J&K Bank was only around Rs. 800 crore which reached the figure of Rs. 2300 crore in March 2009 against the permissible limit of Rs. 1700 crore. As a result, the RBI would time and again reprimand the J&K Bank for violating the norms of MoU entered by the State Government with the bank,” Rather added.
The 30-paise opera
Till the early 80s, 3-paise coins were very much in circulation, even if it did not fit in the decimal series. The government made the exception and introduced 3-paise coins in 1964 to reduce the demand for 2-paise and 1-paise coins. But many wouldn't know that the government was also considering a proposal to introduce 30-paise coins sometimes in 1973. The Posts & Telegraphs Board had suggested this for operating coin-collecting boxes at telephone booths. That was a time when post offices used to run telephone booths and charge 30 paise per call. The Posts & Telegraphs Board thus wanted one coin in the denomination of 30 paise in place of three 10-paise coins of an aggregate weight of 6.9 grams being used in those coin-collecting boxes. The ministry of finance sought the Reserve Bank of India's views on this suggestion. Responding to the ministry's letter in November 1973, the central bank said the proposal bristled with two incongruities. "First, it would be a misfit in the decimal series, adding to the multiple denominations already in circulation; and second, no other country had till then introduced an odd denomination," said the bank. It further added that the coin was likely to become redundant if telephone call charges were raised. RBI had also argued that if the 30-paise coin was to be introduced, the new coin should ideally weigh approximately 6.9 grams, to enable the telephone machine to accept it. But that was not practical because the cupro-nickel 25-paise and 50-paise coins weighed 2.5 grams and 5 grams respectively, and the cupro-nickel 30-paise coin weighing 6.9 grams would have been out of sync in the coin-system. But then a 30-paise coin having a weight anything between 2.5 grams and 5 grams would have necessitated for a recalibration of the coin-collecting boxes.
RBI warns against ads on foreign exchange trading
The Reserve Bank of India (RBI) has noticed advertisements issued by electronic/internet portals offering trading or investing in foreign exchange with guaranteed high returns are illegal and the people should beware of the risks, said Chief General Manager Alpana Killawala in a press release here on Thursday. The advice has become necessary in the wake of many residents falling prey to such tempting offers and losing money heavily in the recent past, she added. Many companies even engage agents who personally contact gullible people to undertake forex trading/ investment schemes and entice them with promises of disproportionate / exorbitant returns, said the press release. The Reserve Bank of India cautions the public not to remit or deposit money for such unauthorised transactions. The advice has become necessary in the wake of many residents falling prey to such tempting offers and losing money heavily in the recent past. The Reserve Bank of India on Thursday clarified that remittance in any form towards overseas foreign exchange trading through electronic/internet trading portals is not permitted under the Foreign Exchange Management Act (FEMA), 1999. Residents are, however, permitted to trade in currency futures and options contracts, traded on the stock exchanges recognised by the Securities and Exchange Board of India (SEBI) in India, subject to the conditions specified by the Reserve Bank from time to time.
Liberalised RBI rules making banking easy in India
The increasing flexibility in the Reserve Bank of India’s (RBI) rules and regulations have contributed to considerably higher levels of growth of India’s financial sector in recent years, despite the global economic slowdown, said a senior banking professional from India yesterday. The RBI is referred to as India’s banker’s bank, controlling, monitoring and supervising the whole banking operations in the country. Speaking to Gulf Times yesterday, executive director of South Indian Bank (SIB) Limited Abraham Thariyan said, now-a-days banks in India could start branches in any place, having a population of less than 50,000. “Absolutely, no licence from the RBI is required these days to start branches in places having less than 50,000 residents,” he said. The RBI’s increasing flexibility has stemmed from the confidence demonstrated by the Indian economy to perform well even when the world has not completely recovered from the financial slowdown, said the senior banking professional. Indian economy has been growing at an impressive rate of between 8 and 8.5% even in the last two years, recalled Thariyan. As a result of such liberalised rules, banks could reach their potential customers more easier and faster than what they used to be, added Thariyan. Along with another prominent private sector bank, SIB accounts for more than 33 % of the NRI remittances coming to the southern Indian state of Kerala, said Thariyan.
Thursday, March 10, 2011
International women's day: Seminar by RBI Kanpur
Women are participating in every field and now they are sharing the responsibility in office as well as in house. This was the opinion of Meeta Jamal, principal Dayanand Girls Degree College. She was speaking at a seminar convened by the Reserve Bank of India on International Women's Day. She said women were playing a lead role in the economic development and playing a significant role in the development of society. Sangeeta Sarswat, a senior gynaecologist, gave some very useful health tips to women participants.
Jewellers, bullion dealers high-risk customers: RBI to NBFCs
Fearing possible involvement of illicit money in dealings by jewellers and bullion dealers, the Reserve Bank of India (RBI) has asked non-banking lenders to treat such entities as "high-risk" customers and be extra cautious while undertaking transactions with them. The RBI direction to non-banking financial companies (NBFCs) follows a similar guideline announced for the banks in January, wherein they were asked to treat jewellers and bullion dealers as high-risk customers. The transactions by jewellers and bullion dealers are highly cash intensive in nature and it is feared that they could be used for flow of black money into the banking system. It is also feared that these entities prefer to do business with NBFCs, as the regulatory framework for non-banking lenders is considered less strict. Now, NBFCs would also have to conduct a stricter than normal due diligence before opening accounts for such entities and subject their transactions to a strict monitoring process. In a circular dated March 8, the RBI has said that it was modifying the master circular for KYC (Know Your Customer) norms and anti-money laundering standards/combating of financing of terrorism obligations of NBFCs to classify bullion dealers and jewellers as "high risk customers". Both banks and NBFCs would also need to immediately inform enforcement agencies about any suspicious activities in the accounts of these entities and non-compliance to the guidelines would attract hefty penalties. "In view of the risks involved in cash intensive businesses, accounts of bullion dealers and jewellers should also be categorised by NBFCs as 'high risk' requiring enhanced due diligence," the RBI circular said. The central bank also asked NBFCs to subject these high risk accounts to intensified transaction monitoring and take the same into account while identifying suspicious transactions for filing Suspicious Transaction Reports to FIU-IND. Financial Intelligence Unit – India (FIU-IND) is nodal agency for receiving, processing, analysing and disseminating information relating to suspected financial transactions. Others being treated as high-risk customers by RBI include nonresident customers, HNIs, trusts, charities, NGOs and organisations receiving donations, companies having close family shareholding or beneficial ownership, politically exposed persons and those with dubious reputation. On the other hand, salaried people, the government departments and the government-owned companies, regulators and statutory bodies are treated as low-risk customers. The high-risk accounts need to be subjected to intensified monitoring for issues like background of the customer, sources of funds and high-value transactions.
Bank credit offtake up 23.3%, deposits up over 16%: RBI
Credit offtake from public and private sector banks in the country grew by over 23.3 per cent for the one-year period ended February 25, indicating an upswing in the industrial activity, says the RBI. According to the apex bank, for the one-year period ended February 25, credit offtake stood at Rs. 39.26 lakh crore as against Rs. 31.83 lakh crore a year ago. During the period, deposits rose to Rs. 52.29 lakh crore from Rs. 45.07 lakh crore as on February 26, 2010, the latest data from the Reserve Bank revealed. This is a rise of over 16 per cent on an annual basis. RBI, in its annual monetary policy at the beginning of the fiscal, had estimated credit offtake to grow by 20 per cent this fiscal. However, in December 2010 the apex bank expressed concern over the widening ratio between the credit and deposit rates of banks. This has the potential to affect the supply of liquidity in the system due to higher lending by the banks vis-a-vis lower deposits. In its recent third quarterly monetary policy review, RBI had noted that the deposit growth moderated during 2010. Several banks raised their deposit rates after the Second Quarter Review of 2010-11, which led to a larger deposit mobilisation in December. Consequently, deposit growth increased to 16.5 per cent by end-December 2010, close to the indicative projection of 17 per cent for the current financial year. However, annual non-food credit growth has been above the Reserve Bank's indicative projection of 20 per cent since early October 2010, rising to 24 per cent by end-December 2010, the RBI said. The wide gap between credit growth and deposit growth resulted in a sharp increase in the incremental non-food credit-deposit ratio to 102 per cent by end-December 2010, up from 58 per cent in the corresponding period of previous year, it added. During the past few months, credit offtake has grown at the rate of 20 per cent on average. Credit offtake has been higher this fiscal on account of large borrowings by telecom firms to pay for 3G spectrum licences. The government realised over Rs. 1 lakh crore from the sale of spectrum of high speed mobile and broadband wireless services, much higher than the Budget estimate of Rs. 35,000 crore. Credit rating agencies like Crisil had earlier said the country was likely to see credit offtake growth at the rate of around 20-22 per cent this fiscal.
RBI likely to raise repo rate to 7.5% in 2011: Expert
All eyes are on the monetary policy review by the Reserve Bank of India on March 17. However, there is a growing concern that RBI may further hike rates in this year. In an interview to CNBC-TV18, Sameer Goel, Director, Head of Asia Rates Research of Deutsche Bank said the RBI may hike rates by 25 bps in March and subsequently increase it to 75 bps. “There is more tightening to come from the RBI, starting including next week we think by 25 bps and probably by another 75 bps following that so take up the repo rate to 7.5%,” he said. According to Goel, there are several structural factors which will keep liquidity still in deficit but an acute shortage of Rs 50,000-100,000 crore on a regular basis is unlikely.
Banks ready with MFI loan rejig plan
CHENNAI: Banks have prepared a blueprint for restructuring loans to microfinance institutions (MFIs). According to the proposal, institutions like SKS Microfinance, Spandana Spoorthy, Asmita, Basixs and Share Micro Finance would be given a maximum of 10 years to repay the loans at an interest rate of 12%. These microfinance lenders were originally sanctioned loans at interest rates between 10% and 15%. MFIs are in the throes of change wherein lending activities have come to a standstill in several parts of the country. The crisis set in after the the Andhra Pradesh government imposed tight restrictions on MFIs. Andhra Pradesh, which is the biggest market for the MFI sector, has seen recoveries dipping to 10%. Besides banks have stopped lending to MFIs choking fund raising. "We have worked out a tentative restructuring plan for the microfinance companies. Now the proposal has to be passed by the bank's respective boards. After which it will be conveyed to the core committee and the MFIs," S N Mishra, GM, priority banking, Indian Overseas Bank, said. The Reserve Bank of India had permitted banks to restructure loans to the MFI sector in January this year. "The RBI has asked banks to extend the regulatory asset classification benefit to standard restructured MFI accounts, even if they were not fully secured. This relaxation was given considering the fact that the problems afflicting the MFI sector were not necessarily on account of any credit weakness per-se but were mainly due to environmental factors," RBI said. The restructuring decision was taken by banks on Tuesday at a meeting in SIDBI's headquarters in Lucknow. However, the decision is not binding on the banks, sources said, adding it was only a proposal. For smaller MFIs, banks are taking it on a case to case basis. The total loans to be restructured by all the banks put together is estimated to be about Rs 13,000 crore. Banks had set up core committees of 10 lenders to look into the restructuring of loans to the MFIs. Besides, MFIs were asked to submit their projected cash flow for next three years. Banks are scheduled to meet RBI officials on March 17 to discuss the Malegam Committee report as well as restructuring of loans to MFIs.
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