RBI to make fresh strict norms to make repossession of vehicles easy

The Reserve Bank of India (RBI) has come forward to help the auto sector which has been hit badly by the recession, therefore working on this line the apex bank is considering of issuing a separate guideline for the banks and the non-banking financial institutions (NBFCs) so that they can easily repossess the vehicles from the loan defaulters.

Later this week Finance Ministry has called for the meeting which will be attended by the representatives of RBI, the banking industry and the automobile sector, among others and will be discussing about the structure of the new guidelines.

Industry sources told, “This will be the second such meeting,” and added that in present situation it is necessary to structure such guidelines to support financing of vehicles by banks and NBFCs.

The auto loan segment has been facing difficulty due to the continuing slowdown and more particularly by the unwillingness of lending institutions to offer loans for the purchase of vehicles.

Earlier on January 30 the representatives from the Finance Industry Development Council (FIDC) — the apex body of NBFCs — Indian Banks Association (IBA), Society of Indian Automobile Manufacturers (SIAM) and private banks had met in this regard.

FIDC Co-Chairman Raman Aggarwal told PTI that at this time there is a need to have a clear-cut guideline and a regulatory system for the repossession of vehicle from the loan defaulters.

“RBI has taken both conventional and unconventional measures to provide enough liquidity in the system... There are some structural reasons (for interest rates not easing immediately)... Over a period of time the rates will come down,” he said.

He said the central bank will continue to take steps in order to certain sufficient liquidity in the banking system, through conventional and unconventional measures

Observing that a well-regulated banking industry has helped the country’s economy shield itself from the present global financial turmoil, he added central banks across the world are acting in concert to avoid such situation in future.

He added banks require more capital to survive in financial crisis therefore should pay more attention on capital-building in ‘good times’.

Sadhana Co-operative Bank got bankrupt, RBI cancels license

Maharashtra-based Sadhana Co-operative Bank license has been cancelled by the Reserve Bank of India (RBI) due to bankruptcy of the bank.

According to RBI release following the cancellation of its license, Sadhana Co-operative Bank, Maharashtra has been forbidden from carrying on banking business.

The release stated subsequent bankruptcy every depositor will get repayment of his deposit up to a ceiling of Rs one lakh from the Deposit Insurance and Credit Guarantee Corporation.

On January 22 the license of the 13-year-old cooperative lender was cancelled by the apex bank. The bank got the license in June 1996. The release added the license of the cooperative bank was cancelled because all efforts to revive it in consultation with the state government did not work.

RBI reports state loopholes in banks’ claiming on financial inclusion

As per the Reserve Bank of India (RBI) banks under the guidance of state-level bankers committees (SLBCs) had declared several districts in the country as 100 per cent financially included, but in actual financial inclusion has not been extended to all the districts.

RBI report stated that most of the accounts which have been opened as part of the financial inclusion drive are still inoperative because of various reasons such as distance from the branch, illiteracy, lack of interest and non-availability of passbooks. The RBI added, “There is a need for SLBC/DCCs to actively step up the awareness with regard to no-frills accounts as this continues to be poor in many districts”.

The RBI remarked, “Although the SLBCs have declared several districts as 100 per cent financially included, the actual financial inclusion has not been to that extent”. While in the RBI’s Annual Policy Statement for the year 2007-08 it was announced that an assessment of the progress will be done of the districts where 100 per cent financial inclusion would be taken up by independent external agencies. Therefore, studies were carried out in 26 districts in the states of Andhra Pradesh, Gujarat, Himachal Pradesh, Karnataka, Orissa, Punjab, Rajasthan and West Bengal. Giving examples, the RBI said, in the Ganjam district, Orissa, about 65 per cent keen of having banking facilities have been provided with such facilities. The RBI notified, “However, no bank branch has extended overdraft or general credit card to any no-frills account holder. There were hardly any transactions in more than three-fourth accounts opened under the no-frills account category”. But the villagers felt it is very difficult to complete transactions within a reasonable time and officials were unwilling to sanction credit facilities for their basic needs. It stated therefore villagers preferred to approach informal sources for quick credit.

According to records in Rajsamand district, Rajasthan, 92.27 per cent households in villages have a bank account. Though 52.39 per cent people had no transactions in their bank accounts due to distance of the branch (79.64 per cent), illiteracy (6.60 per cent) and not being interested (10.04 per cent). Whereas in towns, 98 per cent households had a bank account and 86.94 per cent carried out transactions in the accounts. As per records in towns, those who did not carry out transactions pointed toward non-availability of passbook (75.47 per cent) as the major reason. While in Srikakulam district in Andhra Pradesh, about 71 per cent of all those wishing for of having banking facilities had been provided with accounts. But there are no reports of providing KCC, OD (over draft) or GCC (general credit card) facilities to the no-frill account holders.