Excellence award for RBI's ex-Deputy Governor

MANIPAL: The 7th K K Pai National Award for Excellence in Banking, constituted by the K K Pai Trust has been presented to V Leeladhar, renowned banker and former Deputy Governor of Reserve Bank of India (RBI) here, at the T A Pai Management Institute (TAPMI) campus on Friday, by T Satish U Pai, trust member and MD of Manipal Media Ltd.  After receiving the award, Leeladhar said micro-financing institutions (MFI) play a vital role in eliminating poverty in India. He said they should be encouraged to perform their work within the ambit of possibilities. However, people who start micro-financing should have a passion to serve the poor. MFIs should be solely regulated by RBI and in order to do this, a separate department should be opened in the RBI to look into affairs of MFIs. But caution should be taken so that MFIs don't get into a crisis, he added. Financial inclusion is the instrument of economic development, he said, as it helps the poorest of the poor in the country. It is the buzz word in the financial sector today. It helps for small savings of regular contribution. The SHGs model was introduced based on this concept and lending capacity of SHGs was increased by banks through micro-financing supplementing.  Paying rich tributes to the memory of late K K Pai, Leeladhar said K K Pai and T A Pai were his mentors in the banking field. K K Pai was a micro-manager and had a photographic memory. He was a person with pragmatism and was down to earth and had real concern for his colleagues.

TOI

Once more, then no more - Parnika Sokhi & Malvika Joshi

Bankers and other stakeholders are now almost certain that the Reserve Bank of India (RBI) will increase the key policy rate, or the repo rate, by 25 basis points (bps) on Tuesday. But if they are still keenly awaiting the first quarter review of the monetary policy, it’s because of growing expectations that Governor D Subbarao will finally signal an end to the prolonged rate increase season, with core inflation showing signs of stabilising.The central bank has increased rates 10 times in the last 15 months to arrest the rise in prices. If it does so on Tuesday, it will be the third time in as many months. In May, the policy rate was increased by 50 bps, while in June the quantum was 25 bps. Economists and market watchers said though the wholesale price index (WPI)-based inflation was still much above the central bank’s comfort zone, non-food manufacturing-based inflation, or the core inflation, was steady in June, with food prices easing. “We expect RBI to increase rates by 25 bps. There could be a pause after that in case core inflation shows signs of cooling off in the coming months,” said Siddhartha Sanyal, chief India economist, Barclays Capital. In June, WPI inflation was 9.4 per cent and core inflation was 7.3 per cent, marginally up from the May figure of 7.2 per cent. Food inflation eased. It came down to 7.58 per cent as on July 9 compared to 8.31 per cent a week ago. Economists say inflation is not likely to increase significantly in the coming months unless global commodity prices, particularly of oil, oilseeds, edible oil, sugar and metals, harden, or the monsoon is a big disappointment. “The flat month-on-month core inflation, after an average rise of 1 per cent month-on-month during January-May, is encouraging, as it suggests some easing of price pressure this month, in line with the recent data signalling weakening consumption,” said Nomura Securities in a report. The brokerage firm, which expects a 25 bps increase on Tuesday, is of the view that lower commodity prices and slowing demand will moderate inflation after August. “A case for ending the rising interest rate cycle seems to be building up somewhat more rapidly than we had expected earlier. Industrial growth appears to have moderated, as April and May Index of Industrial Production numbers showed,” said economists at HDFC Bank. Moderation in credit demand is visible with bank credit registering a modest 3.75 per cent growth in the first quarter over March. Bankers said the reasons were high interest rates and an uncertain economic environment. Following RBI’s signal, banks have increased base rates by 50-100 bps since April. According to P Sitaram, chief financial officer of IDBI Bank, banks’ decision to pass on the policy rate increase to customers will depend on the liquidity conditions. “Although liquidity is getting better, it is still not very comfortable. IDBI will take liquidity into account before revising the base rate,” he said. Liquidity conditions have improved in July as compared to the previous month, as indicated by the drop in banks’ borrowings from the liquidity adjustment facility of RBI.

BS

‘Half the people are out of banking fold'

Visakhapatnam, July 24: Union Bank of India is aspiring to become the No. 1 nationalised bank in domestic operations by 2020 and the employees should strive hard to achieve the goal, according to Mr M.V Nair, the Chairman and Managing Director. He was addressing the national conference of the All-India SC, ST Employees' Association of the bank here on Sunday morning. He said the bank was upgrading its technology and laying emphasis on customer relations and financial inclusion. “Even now, fifty per cent of the population is out of the fold of the banking system and therefore our prime endeavour should be financial inclusion. Union Bank has adopted the Business Correspondent model recommended by the RBI and appointed many BCs in the villages, but that is not enough. Bankers should go to villages,” he said.

HBL

Farm debt waiver scheme: CAG seeks details from banks

NEW DELHI: The government auditorCAG has sought details from all banks, including regional rural banks and cooperative banks, regarding the implementation of the Rs 71,000-crorefarm debt waiver scheme. The scheme provided relief to about four crore farmers. Information has been sought to examine how effectively the Agricultural Debt Waiver and Debt Relief Scheme was implemented, sources said. TheComptroller and Auditor General (CAG) is in the process of collating information on the implementation of the scheme. Once the report is finalised it will be presented in Parliament. Usually, CAG does not audit banks as it is done by the RBI and chartered accountants. In 2008, the government had announced the scheme for waiving loans of about three crore farmers and giving partial relief to one crore more cultivators. Under the scheme, marginal farmers cultivating crops in agricultural land of up to five acres got full debt waiver on their short-term crop loans. The scheme, which was for a limited period of 30 days, closed on June 30, 2008. Other farmers having more than five acres of land, received a one-time settlement relief after the payment of a portion of the debt. The debt relief scheme, however, ended in June 2010.

ET

Govt plans to revise WPI base year to 2010-11

Amid concerns expressed by the RBI over wide variation in provisional and final data, the Industry Ministry is looking at revising base year to 2010-11 for computation of inflation index with a view to present more realistic picture of the price situation. The government, in September 2010, changed the base year for calculating Wholesale Price Index (WPI) from 1993-94 to 2004-05 to give a better indication of changes in prices of commodities. "In view of the fast changing developments, we are again thinking of changing the base year for WPI. We thought of 2009-10 but the idea did not find favour as it was a bad year because of the impact of global economic crisis. We may adopt 2010-11 as the new base year," an official said. Reserve Bank Governor D Subbarao earlier this month had expressed concern over the wide variation in macroeconomic data, including those on growth and inflation. "In the RBI, we are handicapped by the reliability of some of the basic data that we need to use in policy calculations...Each time when we have to make an assessment of inflation situation, we are left to double-guess how the provisional numbers may be revised upwards," he had said. The move to revise WPI data, a source said, would help in narrowing the gap between the provisional and final data and provide more updated inputs necessary for formulation of policies. "Currently, a variation (between provisional and final numbers) of about 1% is coming in the new WPI index," the source said. The new index, with 2010-11, is expected to have new items, which would provide a more realistic picture of price rise and its impact on people, the official said, adding most of the additions could be in the manufactured products category. "If the DIPP will start the process now, the exercise can be completed in 15 months and by April 2013, we can come out with the new WPI index," the source added. The Department of Industrial Policy and Promotion (DIPP), an arm of industry ministry brings out the inflation data. Currently, the WPI measures a total of 676 items against 435 earlier. The new items added include readymade food, computer stationary, refrigerators, dish antennas, VCDs, crude petroleum and computers. In the primary article group, few products were being added. Overall inflation for the month ended June stood at 9.44%.

BS

Alternative banking

It is heartening to note that customers are increasingly using alternative channels for banking. Presently, this is true only in the case of individuals and the retail segment. ATM, Internet and mobile banking have enabled customers to access banking services almost 24/7 and the credit should go to the public sector banks and the Reserve Bank of India. Even though most of the banks provide many security mechanisms and authorisation levels, individual and family-centred business firms still prefer to come to the branch. Just as it has been made mandatory that taxes are to be paid online, the Reserve Bank of India should convince firms to use the online facility for all their financial transactions. Only then will technology inclusion in the banking sector bear fruits for one and all.

S. A. S. Sarma, Hyderabad (HBL)

What's wrong with our statistics?

Irony by definition is laced with dark humour, but it would be more like black humour when one views data systems in India. Less than a week after the Reserve Bank of India (RBI) expressed concern over the quality of data, the Central Statistics Office drastically reduced the Index of Industrial Production (IIP) growth number for capital goods for April to 7.3 per cent from 14.5 per cent when it was initially announced......

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Rate tightening is not over, yet

What Reserve Bank of India governor D. Subbarao says on Tuesday will perhaps be more important than what he does. Bankers and business houses have already begun complaining about high interest rates, but most economists and financial market participants are expecting the Indian central bank to continue its fight against inflation by increasing its key policy rate by 25 basis points (bps). That would be a sensible course of action since wholesale prices are still growing at around double-digit rates. Food inflation has begun its downward journey in recent months, but core inflation and the inflation expectations of households are still far beyond safe limits. Subbarao is also aware of the fact that the economy is slowing, but the time to shift focus from battling inflation to supporting growth has not yet arrived—unless a financial shock emanating from either Europe or the US upsets all calculations. While Union finance minister Pranab Mukherjeeis yet not prepared to move down the official growth estimate for 2011-12, most private sector economists expect the Indian economy to expand by around 8% this year, around 1 percentage point below early estimates.  Analysts will watch out for indications in the policy statements about how far interest rates are from their peak. Around 50-75 bps is a fair estimate, which means that we should see two or three more interest rate hikes by the end of December. There are already signs that the 10 interest rate hikes since March 2010 have finally begun to squeeze consumer demand, going by sales trends in sectors such as automobiles and housing that have significant multiplier effects on commodities such as steel and cement. Weaker demand is likely to keep inflation in manufactured goods in check. Even though inflation will not fall appreciably in the next few months, it is quite likely that it would be around 2 or 3 percentage points lower by March 2012. The new normal will still leave inflation at a level far above the comparative number for most other major emerging markets. But that is a problem that cannot be solved without active help from the government in New Delhi, through a new reforms drive and a tighter fiscal policy. Neither is on the horizon right now. 

Mint

DK banks need to pull their socks up

MANGALORE: It was a rude reality check for bankers in Dakshina Kannada district, regarded as cradle of banking, at their inability to meet lending targets as specified by Reserve Bank of India. This inability stood starkly exposed at the district consultative committee meeting for banking development of the district here where reluctance of few banks to disburse education loan as well most banks to achieve RBI prescribed credit deposit ratio came in for criticism. Mangalore MLA U T Khader pointed out to the committee which met here recently that students come to him with complaints of their education loan applications being rejected by banks and that there is no effective grievances redressal system. M S Hasan, lead district officer from RBI, said the apex bank has relaxed norms pertaining to education loans and it must be given to students up to Rs 4 lakh without any collateral security and after following KYC norms. Hasan reminded the bankers that lending for education purpose was investing in the future of the nation and bankers must be aware of the RBI guidelines pertaining to such loans. Hemanatha Bhide, lead district chief manager, pointed that most of the students who apply for education loans are those who come on merit seats from examinations such as the CET and their loan requirement would not cross Rs 4 lakh.

TOI

Banks seek RBI help on Noida Ext loans

NEW DELHI: Facing a potential hit on nearly Rs 10,000 crore lent to builders and home buyers in Noida Extension, banks are planning to seek a special dispensation from the Reserve Bank of India to do without setting aside funds for possible default on these loans.  "We will need the regulator's indulgence on the matter. This is an extraordinary situation necessitated by court rulings," said the chairman and managing director of a public sector bank. The issue is expected to be taken up at the level of the Indian Banks' Association, the industry lobby group, whose management committee is due to meet this week.

TOI

Of visually impaired customers

There are certain procedural guidelines for banking facilities to visually impaired persons where the Reserve Bank of India (RBI) has advised banks that all banks must render the same services to a visually impaired person as it would to any other person without discrimination....

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Single 'know your customer' form may replace separate KYCs

NEW DELHI: Thefinance ministry has proposed replacing the separate 'know your customer' (KYC) checks run by banks andfinancial institutions with a single, more stringent one. The proposal, being examined by all financial sector regulators, was discussed at a recent meeting of the Financial Stability Development Council, or FSDC. "Multiple KYC make the investing process cumbersome," a finance ministry official said, adding that the proposal was under "active consideration". KYC is the due diligence done by banks and financial institutions to identify and locate an entity or individual to ensure that financial transactions are not a part ofmoney laundering or terrorist financing. The official said a single KYC would mean a more rigorous scrutiny of the entity involved. The sub-committee of FSDC, chaired by Reserve Bank of India governor D Subbarao, has representatives of all financial sector regulators and senior officials from the finance ministry. India has also beefed up its KYC norms in line with the requirements of Financial Action Task Force, or FATF. Compliance with FATF standards, which are benchmark regulatory policies to check money laundering and terrorism financing, is essential for international relations of financial institutions and governments. "These standards can be adhered to while making the process uniform and less cumbersome," a government official said. However, the uniform KYC will not dilute the basic tenets; rather make them more stringent, as concerns over black money deepen in the country, he added. The Securities and Exchange Board of India, or Sebi, has already decided on a single KYC for all stock-market transactions and is taking a formal proposal to its board at its July 28 meeting. "Sebi will discuss how to use the UIDAI's (Unique Identification Authority of India) Aadhaar for the KYC requirements," a Sebi official said. The markets watchdog has constituted a committee to examine the idea and take the views of various departments. There are at least six separate sets of KYC norms that an investor must comply with to participate in capital market transactions, though all are regulated by a single entity. Sebi had experimented with the idea through a Market Participation Identification Number, or MAPIN, that was mandatory for transactions of over Rs 1 lakh. It was scrapped in 2007. "For single KYC to succeed, all financial market regulators like Sebi, RBI and IRDA need to sit together. Also, this needs to be connected to UID, which has been rolled out with a lot of thought process," said Ashok Bakliwal, president of Bombay Shareholders' Association.

ET

A lesson in loans

The purpose of education loan introduced by the government in 2001 was to ensure that meritorious students did not discontinue studies for want of funds. Subsequently on the basis of complaints from students and parents on the difficulties faced by them in securing loans, the Reserve Bank of India (RBI) revised the scheme to ensure “more affordable terms and conditions”. Yet, there are innumerable complaints of eligible students being denied the loan, of inordinate delays in grant of loans, of banks demanding collateral security even for amounts that do not require any and cases of corruption and harassment of applicants. I do not know how many students are aware of this, but in such cases as these, they can complain to the nodal officer of the bank and if he does not resolve the issue, complain to the banking ombudsman (www.bankingombudsman.rbi.org.in). I give below three cases decided by the ombudsman . In the first case, in violation of the guidelines framed by the RBI and the Indian Banks Association which clearly state that no collateral security is required for loans up to Rs 7.5 lakh, the bank had taken as security, LIC policies and a fixed deposit of Rs 75,000 from a student who had taken a loan of Rs 2.98 lakh. Also, in violation of its own terms and conditions of sanction, it started recovering the EMIs two years ahead of schedule and without any notice to the customer and even slapped cheque bounce charges. The banking ombudsman directed the bank to return the securities, reverse the cheque bounce charges and reschedule the EMIs. In another case, where the bank returned the application papers after three months (as per guidelines, it is to be disposed of in 15 days to a month) saying that the loan disbursement officer was ill, the ombudsman directed it to pay Rs 10,000 towards compensation and also reconsider the loan, which was duly sanctioned.  In the third case, where the bank had rejected an application on the grounds that “certificate courses” were not covered under the education scheme — this had been upheld by the ombudsman too — the appellate authority under the scheme intervened. The authority pointed out that the guidelines on the educational loan scheme provided only an indicative list of all eligible courses. The bank was free to extend the loan to any course not covered in the list, with the avowed objective that no eligible student should be deprived of higher education for want of finance. The bank was directed to grant the loan.

The Telegraph

Ring of fraud

Saheli Mitra checks out the plethora of scam messages hitting the inboxes of mobile phone subscribers and tells you how to avoid being duped

If you are a mobile phone subscriber, you may have received messages like these on your phone. They bring happy tidings — telling you that you have won a king’s ransom at some mysterious lottery you have never heard of or participated in. However, as many people have found out to their grief, such messages are nothing but skilful and elaborate scams — meant to make you poorer rather than richer. Surabhi Sen, a Calcutta homemaker, fell victim to one such fantastic sms. When she responded to it, she was given a State Bank of India account number and asked to deposit a sum of Rs 15,000 as “transaction fee” for processing and remitting her prize money. Once she paid up, the scamsters took off with the money, and that was the last she had heard of her alleged winnings.  Indian mobile phone users are being flooded with scam smses like these. They come in various forms — lottery wins, employment opportunities, offers to work from home or to get admission at reputed universities abroad. If you respond to these messages, you are looking for trouble. You will invariably be asked to pay an amount under the pretext that it’s a transaction fee, or a registration fee or a processing or clearing fee. You will be persuaded to deposit it in an Indian bank account. Once the money is deposited, it is either withdrawn immediately or fresh demands for higher amounts are made with such messages as “The delivery will not commence unless the courier charges are paid”. And if you happen to be so gullible as to reveal your bank account details, the fraudsters can misuse the information in many ways — starting from identity theft to cleaning up your account. “The only way to stop this vicious network is by making consumers aware of the modus operandi of these scams,” says C.L. Nag, General Manager, Foreign Exchange Department, the Reserve Bank of India (RBI), Calcutta. The RBI has been trying to get all banks to hold awareness programmes, urging customers not to reveal their bank account details in response to phone messages or to unauthorised persons. “We held two awareness drives at Howrah and Sealdah stations in Calcutta earlier this month to make people aware of these frauds. But we need to hold these drives in semi urban and rural areas too where awareness is pretty low,” says Nag.  

The Telegraphlaborate scams — meant to make you poorer rather than richer.Surabhi

The issues facing heads of Banks

In the ultimate analysis, RBI's policies are to be implemented by banks and hence banks' priorities and commitment are crucial. We would seek to show that priorities of banks seem to differ from priorities of RBI. One general comment on bankers' perception of the future growth of the banking industry is that Bankers seemed to be Basel obsessed.....

Details

Savings bank rate de-regulation: A case of hyperbole?

....To be sure, one can say that the RBI could not have adopted any drastic demand containment and inflation cooling measures given its multifarious responsibilities on the growth and development front. Well, that is an issue for the Government and the RBI to settle. But, from an immediate technical perspective, one feels the SB rate is not that important here.....

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Eyes on growth cues in RBI policy

Mumbai : As RBI governor Duvvuri Subbarao prepares to table the apex bank’s first quarter review of the monetary policy on Tuesday, analysts are not so much concerned with another rate hike — rather they are placing more importance on the tone of the policy statement, with expectations that the RBI will take note of economic growth in its announcement. The central bank has so far hiked the key repo rate 10 times since March last year to 7.50 per cent to rein in an obstinate inflation. Economists are nearly unanimous in their view that the RBI will again raise the repo rate by 25 basis points, with headline inflation inching up to 9.44 per cent in June. The repo rate is the rate at which the apex bank provides liquidity to banks. The RBI’s action was followed by the banks hiking lending rates. The State Bank of India has raised its benchmark prime lending rate by 225 basis points since March last year.  These developments have not only affected some of the interest rate-sensitive sectors but also credit growth. In a recent meeting with the RBI, senior bankers had urged the apex bank to put a brake on rate hikes, citing a slowdown in new loan sanctions and a drop in industrial output in May, the slowest in nine months. HDFC Bank chief economist Abheek Barua had recently said, “In our assessment, the RBI rate action will continue to be driven somewhat mechanically by inflation data that remains way above its comfort zone. Thus a hike of 25 basis points in the policy rate seems almost certain on July 26.’’ However, the question that is now being asked is whether the RBI is at the end of its tightening cycle as the repo rate has already been hiked by 275 basis points.  Some analysts aver that the repo will not be hiked by more than 50 basis points from its current levels. Speaking to The Telegraph, Jitendra Arora, senior vice-president (investments), ICICI Prudential Life Insurance, said the RBI was likely to hike the key rate by 25 basis points as inflation had refused to recede. However, Arora said the central bank’s position on the way forward would be crucial. He is of the view that the RBI may soften its stance on rate hikes and will be less hawkish compared with its last policy statement since growth has slowed down.  “We may see the RBI giving more weightage to growth when it comes to future decisions,” he said. Rupa Rege Nitsure, chief economist at the Bank of Baroda, expects a quarter of a percentage point rise in the repo rate. She said the RBI governor might offer some clarity on the rate after which it would take a breather. She believes the central bank may watch the growth trajectory with equal importance in the future. “Though controlling inflation will be high on the RBI’s agenda going forward, it will not be aggressive. This is because, the tightening done so far has led to some slowdown. If the RBI continues to raise rates too fast, it also does not augur well for the asset quality of banks’’, she notes.

The Telegraph

Yields seen up if RBI maintains hawkish stance

Markets have already priced in a rate rise of at least 25 bps. The Reserve Bank of India (RBI) will announce the first quarter review of monetary and credit policy on July 26. Yields may harden if there are any indications of further rate rises. Markets have already priced in a rate rise of at least 25 basis points in the upcoming policy review. However, it remains unclear on the course of policy rates thereafter. “At the upcoming review, more than the call on interest rate, the guidance on policy and inflation over the short term would take precedence,” said IDBI Bank in a research note. RBI has increased policy rates by 275 basis points since March 2010, citing inflationary pressures. The Wholesale Price Index (WPI) is still above RBI’s comfort zone. The WPI for June was 9.4 per cent. The yield on the 10-year benchmark government bond closed at 8.31 per cent on Friday. “Yields may move up to 8.40 per cent if the policy tone is hawkish,” said K Ramanathan, chief investment officer of ING Investment Management. Yields have come off 8.40 per cent levels since May. At the shorter end of the curve, call rates have been hovering at a spread of up to 20 basis points above the RBI repo rate which is at 7.50 per cent. The weighted average call rate, which is the RBI’s target rate, is expected to move up as it adjusts to the new policy rate corridor after rate rise. However, strong demand from banks ahead of the policy may push up the rates tomorrow. The government is scheduled to borrow Rs 12,000 crore via sale of dated securities this week. Also, RBI will auction Rs 7,000 crore worth of 91-day treasury bills and Rs 3,000 crore worth of 364-day treasury bills on Wednesday. Last week, the government said it would not borrow more than Rs 4,17,000 crore as planned and will manage short-term mismatches with the help of cash management bills. RBI had auctioned Rs 12,000 crore via two issuances of cash management bills last week.

BS

RBI may have to walk the tightrope

Will the RBI which has been hiking interest rates heed the plea of large sections and ‘pause'? The answer to that obviously depends on how serious the inflation is viewed, not just a number approaching double digits, and the adverse impact it has on expectations. Second, it is not correct to attribute the slowdown in industry to higher interest rates alone. There is no doubt at all that major policy imbroglios over such matters as land acquisition and environmental clearances for sensitive projects have contributed to the slowdown.....

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There is a need to pause on rate hikes'

As a banker, I feel today there is need to pause. Today when we are projecting growth of 8.5 %, inflation is killing the growth. Now if you kill inflation, growth will also be affected. So you have to keep inflation in check and at the same time you have to also see that growth is not killed or else everything will be hit.....

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