The Reserve Bank of India (RBI) renewed the restructuring advances norms including non-industrial credit.
According to this the non-industrial companies will also be able to use the corporate debt restructuring mechanism (CDR).
With the renewal of the restructuring advances norms, the prudential norms will get coordinated with all debt restructuring mechanisms.
“Since the principles underlying the restructuring of all advances are identical, the prudential regulations too need to be aligned in all cases,” RBI said in a communication to banks.
Accounts streamlined due to natural calamities will be covered by the guidelines issued by the central bank’s rural planning and credit department.
Thursday, August 28, 2008
Monday, August 25, 2008
RBI advises banks to display information of interest rates on notice board
The Reserve Bank of India in a press release reported that banks should display interest rates on notice board. RBI in a move to improve the banking services and financial literacy in the country has advised the banks a comprehensive notice board format for bank branches to inform the customers about the interest rates, services charges and grievances redressal mechanism.
In a communication to the commercial banks, RBI said the display of information should be clear enough to "enable customers to make informed decision regarding products and services of the bank and be aware of the rights as also the obligations of the banks to provide essential services." It said besides displaying the key interest rates, the comprehensive notice board should also include information outlining the facilities for exchange of soiled and mutilated notes, opening of no-frills accounts etc.
The banks have also been asked to display information such as "we offer immediate credit of outstation cheque up to Rs ----(amount)" for satisfactory accounts.
Banks have also been told to clearly display the details on the notice board about the minimum balance requirement for savings bank and no-frills accounts and the charges that would be levied in case of default.
Banks will also be required to put on the notice board the other information concerning opening of Public Provident Fund accounts, Senior Citizens Savings Scheme, issuance of Kisan Credit Cards etc.
RBI said bank branches, should also make available booklets and brochures at 'May I Help' counters to educate the customers about safety features of currency notes.
It said the information regarding working days, working hours and weekly off-days, should be put on notice board outside the branch premises.
In a communication to the commercial banks, RBI said the display of information should be clear enough to "enable customers to make informed decision regarding products and services of the bank and be aware of the rights as also the obligations of the banks to provide essential services." It said besides displaying the key interest rates, the comprehensive notice board should also include information outlining the facilities for exchange of soiled and mutilated notes, opening of no-frills accounts etc.
The banks have also been asked to display information such as "we offer immediate credit of outstation cheque up to Rs ----(amount)" for satisfactory accounts.
Banks have also been told to clearly display the details on the notice board about the minimum balance requirement for savings bank and no-frills accounts and the charges that would be levied in case of default.
Banks will also be required to put on the notice board the other information concerning opening of Public Provident Fund accounts, Senior Citizens Savings Scheme, issuance of Kisan Credit Cards etc.
RBI said bank branches, should also make available booklets and brochures at 'May I Help' counters to educate the customers about safety features of currency notes.
It said the information regarding working days, working hours and weekly off-days, should be put on notice board outside the branch premises.
Wednesday, August 20, 2008
RBI: first phase of liberalization to end in next year
The Reserve Bank of India Deputy Governor V Leeladhar told the RBI will be starting "wholesome review regarding the road map" of foreign banks in the country.
While answering the questions on the sidelines of a function Leeladhar told reporters the first phase of the roadmap of foreign banks will be ending in March next year. He said, "There is a review to be made; wholesome review to be made".
RBI has allowed liberalization in the banking sector in 2005 with an aim to give chance to the domestic banks to reinforce their presence and financial positions through coalition and reform process.
In the first phase of liberalization foreign banks will be allowed to make their presence by setting up a wholly-owned subsidiary (WOS) or conversion of existing branches into a WOS.
Replying to a question, Leeladhar said the growth in loans by Indian banks was 26 per cent year-on-year in the July 2007-June 2008 period. He added credit growth of banks so far (in the current financial year) has been healthy.
Official website: www.rbi.org.in/home.aspx
While answering the questions on the sidelines of a function Leeladhar told reporters the first phase of the roadmap of foreign banks will be ending in March next year. He said, "There is a review to be made; wholesome review to be made".
RBI has allowed liberalization in the banking sector in 2005 with an aim to give chance to the domestic banks to reinforce their presence and financial positions through coalition and reform process.
In the first phase of liberalization foreign banks will be allowed to make their presence by setting up a wholly-owned subsidiary (WOS) or conversion of existing branches into a WOS.
Replying to a question, Leeladhar said the growth in loans by Indian banks was 26 per cent year-on-year in the July 2007-June 2008 period. He added credit growth of banks so far (in the current financial year) has been healthy.
Official website: www.rbi.org.in/home.aspx
Tuesday, August 19, 2008
Kerala HC came down on the 'strong arm' tactics of banks
On Thursday Kerala High Court in a hearing came down on the 'strong arm' tactics being adopted by some new generation banks, for the recovery of loan amounts from customers and stated that they should respect the law of the land.
A division bench headed by Justice K Balakrishnan Nair said police should take effective measures to 'nip in the bud' attempted by such banks to recover loan amounts. He said while giving a judgment in favor of a petition filed by one Sabu of Thiruvananthapuram complaining harassment by goondas allegedly engaged by the private HDFC bank.
The petitioner in his complaint stated that he had purchased a car by taking loan from the bank and due to default in payment; the bank authorities threatened the petitioner and his wife by sending 'goondas'. In spite of complaints to the police, no action was taken, he said.
The bench said that the bank has no right to employ strong arm methods to recover the vehicle. The bank has to respect the law of the land and should take alternative steps in accordance to law.
A division bench headed by Justice K Balakrishnan Nair said police should take effective measures to 'nip in the bud' attempted by such banks to recover loan amounts. He said while giving a judgment in favor of a petition filed by one Sabu of Thiruvananthapuram complaining harassment by goondas allegedly engaged by the private HDFC bank.
The petitioner in his complaint stated that he had purchased a car by taking loan from the bank and due to default in payment; the bank authorities threatened the petitioner and his wife by sending 'goondas'. In spite of complaints to the police, no action was taken, he said.
The bench said that the bank has no right to employ strong arm methods to recover the vehicle. The bank has to respect the law of the land and should take alternative steps in accordance to law.
Wednesday, August 6, 2008
RBI to do surprise checks in banks to check fake currency
The Reserve Bank officials found fake currency from State Bank of India’s branch in Sidharthnagar in Uttar Pradesh with a face value of Rs 20 lakh.
RBI officials said the team has been formed to carry out surprise checks and also increase frequent monitoring of banks.
The Reserve Bank has said it will step up monitoring of banks after a large amount of fake currency was found in a public sector bank on Monday.
The apex bank has already formed a team to carry out such surprise checks, RBI said.
Reserve Bank officials on Saturday found fake currency with a face value of Rs 20 lakh from State bank of India's branch in Sidharthnagar in Uttar Pradesh.
RBI Regional Director for UP and Uttarakhand J B Bhoria while expressing his views said, "A Finding fake note in large quantity in PSU banks is disturbing. The banks found with fake notes will be responsible for it".
Bhoria told to press that it is the responsibility of the bank to look into the matter as to how such huge amount of fake currency reached the strong room of the bank, and should keep a check on the employees who all are involved in the act.
"The RBI has already issued instructions that the associated bank would be responsible in case fake notes are found in the bank or its ATM. We have formed a team for surprise checks in the banks with regard to the fake notes racket", he said.
He further added that team set up by RBI will be carrying out surprise visits to the currency chest of the banks to check if it has any fake currency.
RBI officials said the team has been formed to carry out surprise checks and also increase frequent monitoring of banks.
The Reserve Bank has said it will step up monitoring of banks after a large amount of fake currency was found in a public sector bank on Monday.
The apex bank has already formed a team to carry out such surprise checks, RBI said.
Reserve Bank officials on Saturday found fake currency with a face value of Rs 20 lakh from State bank of India's branch in Sidharthnagar in Uttar Pradesh.
RBI Regional Director for UP and Uttarakhand J B Bhoria while expressing his views said, "A Finding fake note in large quantity in PSU banks is disturbing. The banks found with fake notes will be responsible for it".
Bhoria told to press that it is the responsibility of the bank to look into the matter as to how such huge amount of fake currency reached the strong room of the bank, and should keep a check on the employees who all are involved in the act.
"The RBI has already issued instructions that the associated bank would be responsible in case fake notes are found in the bank or its ATM. We have formed a team for surprise checks in the banks with regard to the fake notes racket", he said.
He further added that team set up by RBI will be carrying out surprise visits to the currency chest of the banks to check if it has any fake currency.
Tuesday, August 5, 2008
By year-end cheques movement to get faster if RBI clear truncation system
At present physical movement of cheques from one bank to another takes a lot of time. In today’s time when everything is moving with fast pace it became necessary to find out way so that outstation cheque clearance is done faster.
It is expected by next year this problem will be solved as Reserve Bank of India (RBI) is set to clear an electronic process called cheque truncation system by the year-end. Under this new system scanned images of cheques will be sent through secure e-mail networks to the destination branch for verification. Once RBI gives approval for this new system banks will be able to set up these systems.
In a speech at a conclave on Indian Banking Vision 2010, V Leeladhar, Deputy Governor, RBI, said, “Over 50 banks are participating in the pilot project being implemented in the NCR (National Capital Region of Delhi). The systems may be cleared by the year-end.” This project was started by the RBI, a couple of years back.
Leeladhar also informed that the guidelines under the Payment and Settlement Systems Act (PSSA) will be released in a week’s time.
Answering to the query related to regulation of money transfer companies, RBI deputy governor Leeladhar said, “There is no oversight on money transfer companies like Visa, Mastercard and Western Union as of now. Once the PSS Act guidelines come into force they will come under the RBI purview.”
Parliament in October 2007 had passed the Act, which brought funds transfer companies — domestic as well as international — operating in India under RBI’s regulation.
At present the payment and settlement services provided by the RBI, is being offered free-of-cost, but now it will be available at a price after March 2009. “However, four banks have decided to offer these services free-of-cost even after the deadline of March 31, 2009,” Leeladhar said. Currently the services are being made available to banks for five years.
In India RBI is operating several nation-wide payment and settlement systems — Real Time Gross Settlement (RTGS), Electronic Clearance System (ECS), National Electronic Fund Transfer (NEFT) and SEFT etc. A new non-profit entity National Payments Corporation of India (NPCI) being set up, except RTGS, all these retail clearance services will be transferred to this entity.
It is expected by next year this problem will be solved as Reserve Bank of India (RBI) is set to clear an electronic process called cheque truncation system by the year-end. Under this new system scanned images of cheques will be sent through secure e-mail networks to the destination branch for verification. Once RBI gives approval for this new system banks will be able to set up these systems.
In a speech at a conclave on Indian Banking Vision 2010, V Leeladhar, Deputy Governor, RBI, said, “Over 50 banks are participating in the pilot project being implemented in the NCR (National Capital Region of Delhi). The systems may be cleared by the year-end.” This project was started by the RBI, a couple of years back.
Leeladhar also informed that the guidelines under the Payment and Settlement Systems Act (PSSA) will be released in a week’s time.
Answering to the query related to regulation of money transfer companies, RBI deputy governor Leeladhar said, “There is no oversight on money transfer companies like Visa, Mastercard and Western Union as of now. Once the PSS Act guidelines come into force they will come under the RBI purview.”
Parliament in October 2007 had passed the Act, which brought funds transfer companies — domestic as well as international — operating in India under RBI’s regulation.
At present the payment and settlement services provided by the RBI, is being offered free-of-cost, but now it will be available at a price after March 2009. “However, four banks have decided to offer these services free-of-cost even after the deadline of March 31, 2009,” Leeladhar said. Currently the services are being made available to banks for five years.
In India RBI is operating several nation-wide payment and settlement systems — Real Time Gross Settlement (RTGS), Electronic Clearance System (ECS), National Electronic Fund Transfer (NEFT) and SEFT etc. A new non-profit entity National Payments Corporation of India (NPCI) being set up, except RTGS, all these retail clearance services will be transferred to this entity.
Monday, August 4, 2008
RBI show signs of worry over rising credit card defaults
Banks are raising interest rates and customer’s financial position is getting weak. This has resulted in defaults in the credit card segment. RBI deputy governor V Leeladhar said on the sidelines of a banking conference the rising credit card defaults in the country is a matter of concern.
When deputy governor was asked about the practice of some banks who issue cards without checking the credit worthiness of their customers said, “Defaults are going up. It’s a matter of concern”.
According to RBI reports credit cards out standings have gone up by a enormous 87 per cent, or Rs 12,375 crore, to Rs 26,596 crore during the year ended May 23, 2008. The report said the downfall in credit card out standings is happening at the time when growth rate in all other segments of personal loans, including housing, consumer durables and advances against fixed deposits, moderated during the period. On Tuesday RBI in its quarterly policy review, stressed on the need to improve the credit quality of banks via stricter credit appraisals.
Recently RBI issued a circular in which banks have been asked not to charge excessive interest rates on personal loans and small advances, including credit cards, and prescribe a ceiling rate on such loans with an aim to control the unchecked practice among banks to hike the rates frequently without valid reasons. Currently banks are charging 40-49 per cent per annum interest rate and in case the card holders fail to make full payment on the due date or pay the minimum amount due, which is almost four times that of housing loan rates – currently at 10.45-11 per cent.
Crisil pointed out in its report that unsecured loans, which consist of personal loans and credit card receivables figure out approximately one-fifth of the total out standing retail loans as on March 31, 2008, up from 6 per cent on March 31, 2004. Therefore the ultimate losses on these receivables are mostly higher than those in the secured asset classes.
With the rising interest rates in the unsecured loans segment (mainly credit cards), the exposure to low-income customers is steadily increasing. Currently loss levels in the low-income customer segment are estimated in the 7 to 9 per cent range. According to Crisil reports a further decline in asset quality can be seen in the segment, due to seasoning in portfolio, over-leverage by customers, and the entry of players into under-banked geographies. The loss levels can be in the 12 to 15 per cent range over the medium term.
When deputy governor was asked about the practice of some banks who issue cards without checking the credit worthiness of their customers said, “Defaults are going up. It’s a matter of concern”.
According to RBI reports credit cards out standings have gone up by a enormous 87 per cent, or Rs 12,375 crore, to Rs 26,596 crore during the year ended May 23, 2008. The report said the downfall in credit card out standings is happening at the time when growth rate in all other segments of personal loans, including housing, consumer durables and advances against fixed deposits, moderated during the period. On Tuesday RBI in its quarterly policy review, stressed on the need to improve the credit quality of banks via stricter credit appraisals.
Recently RBI issued a circular in which banks have been asked not to charge excessive interest rates on personal loans and small advances, including credit cards, and prescribe a ceiling rate on such loans with an aim to control the unchecked practice among banks to hike the rates frequently without valid reasons. Currently banks are charging 40-49 per cent per annum interest rate and in case the card holders fail to make full payment on the due date or pay the minimum amount due, which is almost four times that of housing loan rates – currently at 10.45-11 per cent.
Crisil pointed out in its report that unsecured loans, which consist of personal loans and credit card receivables figure out approximately one-fifth of the total out standing retail loans as on March 31, 2008, up from 6 per cent on March 31, 2004. Therefore the ultimate losses on these receivables are mostly higher than those in the secured asset classes.
With the rising interest rates in the unsecured loans segment (mainly credit cards), the exposure to low-income customers is steadily increasing. Currently loss levels in the low-income customer segment are estimated in the 7 to 9 per cent range. According to Crisil reports a further decline in asset quality can be seen in the segment, due to seasoning in portfolio, over-leverage by customers, and the entry of players into under-banked geographies. The loss levels can be in the 12 to 15 per cent range over the medium term.
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