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Saturday, April 23, 2011
RBI begins cheque truncation system
SBI to bear loss arising out of termites eating currency notes
Lucknow: Though the exact amount of loss arising out of termites eating up currency notes inside a steel chest at a State Bank of India (SBI) branch in Barabanki district of Uttar Pradesh is yet to be quantified, it will be borne solely by the SBI itself and there would be no loss to the public at large. This was stated by Amarendra Sahoo, Regional Director of Reserve Bank of India, Uttar Pradesh and Uttaranchal. Talking to FE, Sahoo said that the joint team of senior RBI and SBI officials, which had visited the bank in Barabanki, has found that though mutilated, most of the notes eaten up by the termites had their numbers intact. “Those notes in which the numbers are intact, will be replicated by the RBI while the fate of those which have been mutilated beyond repair will be adjudicated once the investigation is complete,” said Sahoo, adding “there would be no loss to the public. The bank will bear the loss, if any.” It may be mentioned that in an almost outlandish case, aghast bank officials on Wednesday found termites to have made a hearty meal out of currency notes worth approximately Rs 1 crore kept inside the strong room at a SBI branch in Fatehpur block of Barabank district near Lucknow. A team of senior officials of the SBI and RBI visited the branch on Thursday to investigate the matter. SBI AGM Geeta Tripathi, who headed the inquiry team said after the visit prima facie it appeared that the notes in the currency chest had been damaged by termites as the branch was housed in a very old building which was ridden by termites. Cases of files and furniture being damaged due to this malice had already been brought to the notice of the management and efforts were on to relocate the bank at some other place. The SBI, had in a press release late on Thursday night clarified that “no discrepancy has been detected in the currency chest except that some notes have been found to be slightly damaged. We don't expect any loss arising out of this and all corrective measures have been taken”.
Infrastructure debt fund outline to be drawn up on Monday
New Delhi: The government and financial sector regulators such as RBI, Sebi and Irda will draw up the outline of the proposed infrastructure debt funds on Monday as the country prepares for raising $1 trillion for building ports, highways, power utilities and telecom infrastructure in the next five years. The finance ministry, which will co-ordinate the meeting, will also seek views from foreign pension funds on how to make the proposed infrastructure debt fund an attractive investment option for them, a senior ministry official told FE. By June, the government hopes to give final shape to the fund announced in budget 2011-12. Finance minister Pranab Mukherjee announced setting up debt funds through special purpose vehicles for attracting foreign investment in the infrastructure sector. “To attract foreign funds for financing of infrastructure, I propose to create special vehicles in the form of notified infrastructure debt funds,” he had stated. Last June, an expert panel headed by HDFC chief Deepak Parekh had recommended setting up such a fund with an initial corpus of R50,000 crore to meet the financial needs of the sector. According to sources, the proposed infra debt fund would have relaxed capital adequacy norms. In the budget for this fiscal, finance ministry had lowered the withholding tax rate from 20% to 5% and exempted the income of the fund from payment of income tax.
RBI grants relief to banks on NPAs
MUMBAI: In a move that will ease pressure on bank profits, Reserve Bank of India has said that an earlier guideline requiring additional funds to be set aside for bad loans will not apply to loans that turn bad after September 2010. This move will benefit all lenders as RBI has now specified the end point for setting aside additional provisions on bad loans. These guidelines on additional provisions were issued in October 2009 after banks turned in large profits following a bounce back from the global financial crisis. At that time, the central bank had said that the idea was to build up a capital buffer during good times so that it could be used ifthe outlook for the economy changes. suddenly State Bank of India will gain directly from this measure as RBI has said that even for those banks that have not achieved the prescribed provision coverage ratio, the target date continues to be September 30, 2010. SBI has been struggling to meet the 70% PCR and was expected to meet the target in the current fiscal. "Some of the banks that had been granted extension of time beyond the stipulated date for achieving the PCR of 70% on their request should calculate the required provisions for 70% PCR as on September 30, 2010 and compute the shortfall there from," said RBI "What this means is that after making provisions for NPAs as on September 2010, banks will only need to make the normal provisions for bad loans and the additional burden on the balance sheet will cease. But going forward, provision requirement could get stiffer as regulators move towards advanced accounting standards," said the chairman of a public sector bank. But banks that have already made a provision will need to keep it aside as an additional buffer. "The surplus of the provision under PCR vis-Ã -vis as required according to prudential norms should be segregated into an account styled as countercyclical provisioning buffer. This buffer will be allowed to be used by banks for making specific provisions for NPAs during periods of system-wide downturn with the prior approval of RBI," the central bank said. In a recent report on the banking sector, Care ratings had said that banks had improved its provision coverage ratio to 58.31% by end-December 2010 from 52.85% a year back. Private banks have already crossed RBI's prescriptions by achieving a PCR of 74% as against 70% mandated by RBI but public sector banks continued to lag with a PCR of 54.41%. "On an overall basis, provisioning expenses rose by 54.48% on y-o-y basis in 9MFY11 on back of higher NPA provisioning by banks to achieve the RBI mandated 70% NPA provision coverage," Care said.
Bank investments in mutual funds more than double
Investments made by banks in mutual funds soared in the fortnight ended April 8, on the back of improved liquidity. According to the data released by the Reserve Bank of India(RBI), bank investments in instruments issued by mutual funds had more than doubled compared to the previous fortnight. Bank investments in mutual funds were at Rs 111,279 crore on April 8 compared to Rs 47,638 crore as on March 25. “Liquidity had improved in the first week of April as year-end pressures came off,” said a banking analyst at a domestic brokerage. Liquidity had sharply turned into the surplus mode in the first week of April. According to analysts, excess funds that banks had picked up in order to dress their balance sheets towards the financial year end.
RBI Announces Limits for Ways and Means Advances for 2011-12
Mumbai (ABC Live): The RBI on Friday has decided in consultation with the Government of India that the limits for Ways and Means Advances (WMA) for the financial year 2011-12. Information to this effect was made by Alpana Killawala, Chief General Manager through Press Release: 2010-2011/1542 that the limits for Ways and Means Advances (WMA) for the financial year 2011-12 would be as under:
The Reserve Bank may trigger fresh floatation of market loans when the Government of India utilises 75 per cent of the WMA limit. The Reserve Bank would retain the flexibility to revise the limits at any time, in consultation with the Government of India, taking into consideration the prevailing circumstances. The interest rate on WMA/overdraft will be: a) Ways and Means Advances: Repo Rate b) Overdraft: Two percent above the Repo Rate The minimum balance required to be maintained by the Government of India with the Reserve Bank of India will not be less than Rs.100 crore on Fridays, on the date of closure of Government of India's financial year and on June 30, i.e., closure of the annual accounts of the Reserve Bank of India and not less than Rs.10 crore on other days. As per the provisions of the agreement dated March 26, 1997 between the Government of India and the Reserve Bank of India, overdrafts beyond ten consecutive working days will not be allowed.
Centre can borrow more till June 30
The Centre will get a little more headroom for borrowings under the ways and means advances (WMA) facility that the Reserve Bank of India operates. The Centre will now be able to borrow up to a maximum of Rs 45,000 crore through this window between April 21 and June 30 — which is a greater part of the first quarter. Last year, the government had been kept on a tight leash with WMA borrowings capped at Rs 30,000 in the first half of the year till September 30. This got tighter in the second half (October 1 to March 31) when borrowings were limited to Rs 10,000 crore. This year the limit will be bumped up to Rs 45,000 crore for a short period of 71 days. It will, however, be kept at Rs 30,000 crore between April 1 and April 20 and then again between July 1 and September 30. In the second half of the year, the limit will be scaled back to last year’s level of Rs 10,000 crore. As in the past, the RBI may trigger a fresh flotation of market loans when 75 per cent of the limit under WMA are utilised. Under the provisions of a 1997 agreement between the government and the RBI, the Centre will not be allowed an overdraft facility beyond 10 consecutive working days. The interest rate on the WMA advances will be pegged at the repo rate, which is currently pegged at 6.75 per cent. This could rise by 25 basis points when the RBI meets on May 3 to review its monetary policy. The interest rate on overdrafts will be capped at 2 percentage points above the repo rate. The government will have to maintain a minimum balance of not less than Rs 100 crore on all Fridays, the date of closure of the Government of India’s financial year, and on June 30 when the RBI closes its annual accounts. On all the other days, a minimum balance of Rs 10 crore will have to be maintained. The WMA facility was introduced in 1997 after the system of issuing ad hoc treasury bills was phased out. It provides temporary accommodation to the government — up to 90 days — and is subject to limits. The Fiscal Responsibility and Budget Management (FRBM) Act 2003 has prohibited direct borrowings by the Centre from the RBI with effect from April 2006 except by way of WMA or under exceptional circumstances.
To fine tag lane violators, operator writes to NHAI
DS Construction (DSC), the agency responsible for regulating movement through the toll gate on the Gurgaon-Delhi Expressway, has said that though they had written to the National Highways Authority of India (NHAI) proposing a penalty on motorists who violate traffic lanes, it is yet to get a response. According to the DSC, most of the traffic jams take place when non-tag commuters move into the tag lane and heavy vehicles move into ordinary lanes — causing confusion. Despite deploying marshals and requesting for change from the Reserve Bank of India, it has not been able to manage the situation.
Kadapa DCCB gets RBI licence for banking
The Reserve Bank of India has granted licence to Kadapa District Cooperative Central Bank (DCCB) to carry on banking business in India, Kadapa DCCB Chairman K. Brahmananda Reddy has said. RBI's Rural Planning and Credit Department regional office in Hyderabad sent a communiqué granting the licence under Section 22 read with Section 56 (o) of the Banking Regulation Act, 1949, Mr. Reddy told newsmen.
Friday, April 22, 2011
This auction has a banknote that even RBI will vie for
Walk into the Expo Center at Cuffe Parade's World Trade Centre and, if you are lucky, you may be able to pick up a gold coin weighing 1 tola (11.6 grams) for around Rs 50,000. We know the market price for a gold coin is close to Rs 24,000. But this ain't an ordinary coin. It's a rare piece of Indian history that will be yours to keep and cherish. Starting today, the World Trade Centre is hosting an exhibition that will be followed by an auction conducted by a leading numismatic firm, Todywalla Auctions. Among the collectibles that will be up for auction are a silver-punched coin belonging to Magadha Janapada, which flourished in central India 2,500 years ago. There are also 1,700-year-old gold coins from the Gupta and the Kushan empires. What should excite most history buffs is that the collection also includes coins from the era of one of India’s most well-known emperors - Jalal-ud-din Akbar. Malcolm Todywalla, of Todywalla Auctions, said, “Most of the Akbar gold mohurs weigh approximately 11.6 grams (1 tola). These used to have the name of the emperor, the place where it was minted and the date, etched in Urdu. Likewise, the square-shaped coins were typical of Akbar’s time… These rare artefacts are priced at nearly Rs 50, 000 each.” Perhaps in a sign of the deteriorating conditions of the Mughal dynasty, there are also coins in silver (a less valuable metal) on display from lesser-known emperors such as Jahandar Shah and Farukhsiyar. However, what sets Todywalla’s heartbeats racing is a not metal but paper. Neverthless do not underestimate it. This British Oriental Banknote from the 1840s is so rare that even the Reserve Bank of India’s museum doesn’t have one of its own. The bank note, expected to fetch anything between Rs 6 lakh to Rs 8 lakh, was printed only for the Indian market. In the centre of the note is Mumbai’s Town Hall (now the Asiatic Library), surrounded by open expanses of greenery and medieval Gothic buildings. But will Indians actually spend good money on such items? Todywalla believes so. “There’s a great demand for the Indian numismatics in the market. People are very keen to buy them because apart from its monitory value, these rare items speak volumes of India’s rich culture and heritage,” Todywalla said.
Baby steps cannot curb inflation - S. S. TARAPORE
In its first monetary policy review this fiscal, the RBI should jettison half-hearted measures and go for an unequivocal anti-inflationary thrust. There is scope to increase the cash reserve ratio and place limits on credit growth. The Reserve Bank of India (RBI) will, on May 3, 2011, announce its first Review of Monetary Policy for 2011-12. For the past two years, the spectre of inflation has loomed large, but RBI has consciously opted for ‘baby' steps in its monetary policy, ostensibly on the premise that nothing should be done to slow down economic growth. The year-on-year Wholesale Price Index (WPI) at the end of March 2011 is close to 9 per cent. The average WPI showed an increase of 9.4 per cent in 2010-11, as against 3.6 per cent in the previous year. The average food inflation in 2010-11 is uncomfortably high at 11 per cent. The government's policy was clearly tilted towards accelerating growth, and inflation was considered as an inevitable price for growth. The government now recognises that inflation is now strongly wedged into all sectors; there are strong compulsions to control inflation as it is impacting not only the poor, but also the vocal middle class. The Finance Minister, Mr Pranab Mukherjee, has, more recently, referred to a clear choice between controlling inflation and sacrificing some growth. The Deputy Chairman of the Planning Commission has admitted that a 9 per cent growth in 2011-12 is no longer in the realm of possibility and that we would have to settle for 8.5 per cent. While the RBI will be berated for not taking effective action to squelch inflation, it must, in fairness, be stressed that the overbearing tilt of the government towards growth has made life for the RBI rather difficult. The window of opportunity for strong monetary policy action is invariably short and the RBI would, in the current milieu, be well advised to jettison its ‘baby' steps and opt for stronger measures. It is the job of industry to shout from the roof-tops that any increase in interest rates would jeopardise growth. Banks will also argue that any increase in interest rates would reduce their net interest margins. The RBI should not be swayed by these seductive sirens. The RBI has to take a call on the monetary policy on May 3, 2011, and it would be best if its stance was in the nature of a strong, unequivocal and unswerving anti-inflationary policy. The present repo policy of 6.75 per cent is out of kilter and ‘baby' steps would not be in consonance with the difficult inflationary situation. The central bank would need to take note of its own Inflation Expectations Survey of Households which reflects an anticipated inflation rate of 13 per cent. The RBI should, on May 3, 2011, shift gears and move over to at least a one-half of one percentage point increase in the repo rate to 7.25 per cent; in actual fact the need of the hour is a full one percentage point increase, but this would not fit in with the prevailing RBI philosophy. The apex bank has rightly indicated that it would prefer the banking system to be in deficit mode, which would make the monetary transmission process more effective. It been reluctant to wield the cash reserve ratio (CRR) instrument lest it result in a cessation of credit. Banks are clearly over-extended with a year–on-year incremental credit deposit ratio of 99 per cent and as such there is no likelihood of any cessation of credit. The RBI should, therefore, increase the CRR by 0.50 percentage point which would impound Rs 25,000 crore and move banks into a deficit mode. The RBI should set a prudential limit of an incremental credit-deposit ratio of say 70 per cent; any bank exceeding the 70 per cent limit should be subject to a penal interest of 3 percentage points above the prevailing rate at which it seeks access under any RBI facility. Anticipating pressures on their net interest margins, banks have already started reducing their deposit rates, instead of increasing their lending rates. This reflects the clear bias of banks against depositors. The Discussion Paper on the Savings Bank Deposit Rate is showing no signs of life. Pending the comprehensive Discussion Paper, the least the RBI could do, in the present situation, is to immediately increase the Savings Bank Deposit rate from a fixed rate of 3.5 per cent to a fixed rate of 4.0 per cent. It is unconscionable that banks should borrow from the RBI and place these funds with mutual funds. Banks should not be allowed to pass on their funds management duties to mutual funds.If the RBI is committed to developing the gilt-edged securities market it should progressively increase the proportion of banks' holdings of these securities which should be marked-to-market. The draft guidelines for licensing of new private sector banks have been inordinately delayed and the RBI would be well advised to release these draft guidelines on May 3, 2011.
Termites eat up Rs 1 crore at SBI branch in Uttar Pradesh
Currency notes worth over Rs 1 crore were reduced to dust in the chest of State Bank of India (SBI) in Uttar Pradesh's Barabanki district, officials said on Thursday. The mutilated notes were found in the chest on Wednesday. Apparently, termites ate the stacks of notes. An SBI chest normally contains Rs 50 crore cash for disbursement. The officials at the bank remained non-committal about the amount of cash destroyed. However they estimated that the loss of currencies could be worth over Rs 1 crore. The Reserve Bank of India (RBI) has been informed about the incident and anti-termite treatment was underway at the branch. Branch Manager Sunil Dwivedi said, "I am not sure where the termites came from, but as you can see this building is quite old. Anti-termite treatment is now underway."
Fake currency worth Rs 2.8L detected at RBI
CHANDIGARH: The Reserve Bank of India (RBI) in Sector 17 is being haunted by fake currency notes. Fake currency totalling Rs 2.80 lakh, which includes notes in the denomination of Rs 50, Rs 100, Rs 500 and Rs 1,000 was detected by RBI officials in the last six months. The RBI officials have submitted the fake notes at the sector 17 police station for further investigation. Police sources said the maximum fake currency was detected on March 16, this year. It comprised 406 notes, including 7 notes of Rs 1,000 and 352 of Rs 100. The fake currency was detected while checking the notes through special machines installed at the RBI in sector 17. The latest tranche of fake currency was detected on April 19 and comprised 284 notes including 7 of Rs 1,000, 29 of Rs 500 and 219 of Rs 100. This fake currency has been submitted with the police station in sector 17 and a detailed development report (DDR) has also been lodged in this regard. A senior RBI official on condition of anonymity told TOI, 'It is very difficult to ascertain who is depositing the fake currency with the bank because money at the bank is received from different parts of India, especially from different branches situated in northern India'. The RBI official said, 'We can't destroy the seized fake currency without informing the area police and we have also sought help from cops to detect the source of these fake notes'. Inspector Hardeet Singh, SHO of the police station in sector 17 said, 'It is very difficult to ascertain the source of the fake currency because the RBI branch in sector 17 has a huge jurisdiction and currency is received from different parts of India'. He said after completing the formalities, the fake notes will be returned to the RBI authority, which is authorized to destroy it.
Got lottery mail? Report it: DM
NOIDA: If you get an email from the Reserve Bank of India (RBI) congratulating you on winning an international lottery prize worth several hundred dollars, beware! It's a fraud, delete it, ignore it and don't get tempted by it. This is the message conveyed by the district administration of Gautam Budh Nagar to warn its citizens regarding the menace of email fraud. Says Deepak Agarwal, District Magistrate, "The RBI has circulated a notice to create awareness amongst the public about this fraud. People should be careful and not believe these emails." He adds, "This is a good initiative by the RBI, as it will help save many an innocent from losing hard-earned money." In the last few years, there has been an increase in such instances of banking fraud through 'phishing'. Phishing is a fraud where criminals create emails and websites that closely resemble those of legitimate companies. Generally, the fraudsters lure people through these e-mails by promising an astronomical amount either for wining a lottery or for helping to secure a deceased person's wealth, or promising a job in a big corporate or even securing admission in a prestigious educational institute. "Unfortunately, not many people complain or even register a case on receiving such fraud emails," says Alok Kumar Singh, in-charge of the surveillance and cyber cell in Gautam Budh Nagar. He adds, "It is a cause for concern and needs to be addressed. Anyone who needs to register a complaint regarding cyber fraud can contact us at the senior superintendent of police's camp office, located at sector 27." As per the circular received by the administration, the RBI has clarified that remittance in any form towards participation in lottery schemes is prohibited under the Foreign Exchange Management Act, 1999. Further, these restrictions are applicable also to remittances for participation in lottery-like schemes functioning under different names, such as, money circulation scheme or remittances for the purpose of securing prize money or awards. Moreover, the RBI has clarified that it neither maintains any account in the name of individuals, companies or trusts in India to hold funds for disbursal nor does it allow individuals to open an account to deposit money with the Reserve Bank. It also does not issue any certificates or advices or confirmations, evidencing receipt and holding of money in these accounts.
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