According to the Reserve Bank of India (RBI) report in 2008-09 there has been increase in the customer complaints related to banking services. The increase is by 44%, mainly related to credit card services and failure in meeting commitments. As per RBI data there has been large number of complaints against State Bank of India (SBI), ICICI Bank Ltd and the local unit of HSBC Holdings Plc.
As per the annual study – Report on Trend Progress of Banking in India, 2008-09 by the end of financial year 31st March the banking ombudsmen received 69,117 complaints as against 47,887 a year earlier.
In India around 70% or more of India’s banking needs are catered by public sector banks, thus complaints against public sector banks rose by 33,141 from 25,694 during 2007-08.
While 21,982 complaints were filed against private sector banks and against foreign banks there were around 11,700 complaints.
Amongst the public sector banks the highest numbers of complaints were registered against the SBI group accounting to 18,167. Out of this, 15,306 complaints registered were against the country’s largest lender, SBI only from which 4,295 related to credit cards, followed by 2,631 over failed commitments.
A year ago there has been increase in the complaints related to credit card which rose from 10,107 a year ago to 17,603.
ICICI Bank is the largest credit card issuer in India with a base of 8.5 million cards, around 3,560 credit card-related complaints were registered against it and 1,914 complaints were filed for failure in meeting commitments made.
The highest number of complaints around 2,838, were filed against HSBC Bank among the foreign banks. Out of this 1,418 complaints were related to credit cards.
“The credit card-related complaints could be associated with the customer being wrongly charged for a transaction not done by her. There could be disputes over certain charges levied by the bank,” informed the anonymous credit card head of a private sector bank, as the bank is in its silent period prior to the announcement of its second quarter results.
The report stated against the public sector banks there is large number of complaints related to pension payments, and in case of private sector banks the complaints were mainly related to the direct-selling agents.
An anonymous RBI official who is not the official spokesperson for the central bank told, “In case of pensioners, the common error made by bankers is when they are doing the dearness allowance computation”.
The report stated, the “banking ombudsman offices at New Delhi, Chennai and Mumbai together accounted for 44.1% of the total complaints received during 2008-09 compared with 36.3% during the previous year”.
The “banking ombudsman offices at New Delhi, Chennai and Mumbai together accounted for 44.1% of the total complaints received during 2008-09 compared with 36.3% during the previous year”, the report said.
Wednesday, October 28, 2009
Monday, October 26, 2009
RBI to review new bank licensing norms for the private banks
The Reserve Bank of India (RBI) had first issued the guidelines for licensing new banks in the private sector in 1993 and after that it reviewed them in 2001. This year RBI is again reviewing the new bank licensing norms.
According to sources this time during the review RBI will be taking into account the minimum paid-up capital of the bank, nature of new entities to be allowed in the banking sector, promoters’ contribution in the paid-up capital, nature of promoters and corporate governance norms in the current scenario.
It is stated the net worth of new banks might be increased from Rs 300 crore at present also the corporate governance norms for promoters are likely to be tightened further. As per sources, the RBI might allow the entry of more private well-governed banks having higher capital adequacy and transparency norms, in accordance to the recommendation of the Raghuram Rajan committee on financial sector reforms.
The RBI will have the full control over the private sector banks as of local area banks; the apex bank will formulate norms for enhancing the financial viability of such bodies.
The Rajan committee in its report for small private sector banks has said that initially it will be an entry point for small entities in the banking system that can later grow into large banks.
The report also stated that in case of failure of a few small banks, there will not be much systemic risk as in case of single large bank. However the RBI will be reviewing existing norms for the conversion of a non-banking finance company (NBFC) into a bank, allowing a corporate house-promoted NBFC into a bank may not be examined at present. According to sources there are many large banks which should be made more efficient before allowing other large entities.
Also RBI is looking over the possibility of relaxing norms for entry of agency banks of Indian banks operating overseas or banks with whom Indian banks are having strong business connection overseas. But, RBI at present is not reviewing the roadmap for expansion of foreign banks in India, as this option is a part of the limited review.
The sources pointed out that other country regulators as accepting in their bank licensing policies for Indian banks in their countries as the Indian banking regulator the RBI.
According to sources this time during the review RBI will be taking into account the minimum paid-up capital of the bank, nature of new entities to be allowed in the banking sector, promoters’ contribution in the paid-up capital, nature of promoters and corporate governance norms in the current scenario.
It is stated the net worth of new banks might be increased from Rs 300 crore at present also the corporate governance norms for promoters are likely to be tightened further. As per sources, the RBI might allow the entry of more private well-governed banks having higher capital adequacy and transparency norms, in accordance to the recommendation of the Raghuram Rajan committee on financial sector reforms.
The RBI will have the full control over the private sector banks as of local area banks; the apex bank will formulate norms for enhancing the financial viability of such bodies.
The Rajan committee in its report for small private sector banks has said that initially it will be an entry point for small entities in the banking system that can later grow into large banks.
The report also stated that in case of failure of a few small banks, there will not be much systemic risk as in case of single large bank. However the RBI will be reviewing existing norms for the conversion of a non-banking finance company (NBFC) into a bank, allowing a corporate house-promoted NBFC into a bank may not be examined at present. According to sources there are many large banks which should be made more efficient before allowing other large entities.
Also RBI is looking over the possibility of relaxing norms for entry of agency banks of Indian banks operating overseas or banks with whom Indian banks are having strong business connection overseas. But, RBI at present is not reviewing the roadmap for expansion of foreign banks in India, as this option is a part of the limited review.
The sources pointed out that other country regulators as accepting in their bank licensing policies for Indian banks in their countries as the Indian banking regulator the RBI.
Most of the banks have adopted CBS: RBI reports
The Reserve Bank of India has released a report which stated that between September 1999 and March 2009, around Rs 17,897 crore has been spent by 27 public sector banks on computerization and development of communication networks. With this by the March-end 2008 ratio of public sector bank (PSB) branches to achieve full computerization has increased from 93.7 per cent to 95 per cent in March-end 2009.
Also by the March-end 2009 out of 27 PSBs, 15 banks have fully brought their branches under the core banking solution. These banks include Andhra Bank, Corporation Bank, Indian Bank, Oriental Bank of Commerce, Punjab National Bank, Syndicate Bank, Union Bank of India, Vijaya Bank, State Bank of India and its six associate banks.
The banks that still have to cover all their branches under CBS include Punjab and Sind Bank (1.1 per cent of the total branches on CBS), Allahabad Bank (9.7 per cent), Central Bank of India (30.8 per cent), and Canara Bank (38.6 per cent).
Under the CBS banks are able to computerize their operations through integration of communication and information technology. This also enables bank customers to operate their accounts from any branch of the bank or via internet and mobile phone.
The report added, “The total number of branches of public sector banks which have implemented CBS increased from 35,464 as on March-end 2008 to 44,304 as on March-end 2009. The process of computerisation of the banking sector, which is regarded as the precursor to other technology initiatives, is almost on the completion stage”.
According to report in 2008-09 banks (public sector, old private sector, new private sector, and foreign) had collectively opened 3,479 branches (4,087 in 2007-08) and 8,862 ATMs (7,701 in 2007-08). Thus by March-end 2009, the number of branches and ATMs of scheduled commercial banks reported to be 64,608 and 43,651 respectively.
However in 2008-09, the percentage of ATM branches opened has increased. As per report it has been 40.2 per cent (35.4 per cent) for nationalised banks; 56.9 per cent (47.2 per cent) for old private sector banks; and 296.6 per cent (279.9 per cent) for new private sector banks. But the percentage of State Bank Group and foreign banks, the number of ATMs installed has declined to 29 per cent (55.8 per cent) and 357.3 per cent (377.4 per cent) respectively.
Out of all the ATMs installed in the country by the March-end 2009, the new private sector banks have the largest share in off-site ATMs (7,480), whereas the nationalised banks had the largest share in on-site ATMs (10,233).
Also by the March-end 2009 out of 27 PSBs, 15 banks have fully brought their branches under the core banking solution. These banks include Andhra Bank, Corporation Bank, Indian Bank, Oriental Bank of Commerce, Punjab National Bank, Syndicate Bank, Union Bank of India, Vijaya Bank, State Bank of India and its six associate banks.
The banks that still have to cover all their branches under CBS include Punjab and Sind Bank (1.1 per cent of the total branches on CBS), Allahabad Bank (9.7 per cent), Central Bank of India (30.8 per cent), and Canara Bank (38.6 per cent).
Under the CBS banks are able to computerize their operations through integration of communication and information technology. This also enables bank customers to operate their accounts from any branch of the bank or via internet and mobile phone.
The report added, “The total number of branches of public sector banks which have implemented CBS increased from 35,464 as on March-end 2008 to 44,304 as on March-end 2009. The process of computerisation of the banking sector, which is regarded as the precursor to other technology initiatives, is almost on the completion stage”.
According to report in 2008-09 banks (public sector, old private sector, new private sector, and foreign) had collectively opened 3,479 branches (4,087 in 2007-08) and 8,862 ATMs (7,701 in 2007-08). Thus by March-end 2009, the number of branches and ATMs of scheduled commercial banks reported to be 64,608 and 43,651 respectively.
However in 2008-09, the percentage of ATM branches opened has increased. As per report it has been 40.2 per cent (35.4 per cent) for nationalised banks; 56.9 per cent (47.2 per cent) for old private sector banks; and 296.6 per cent (279.9 per cent) for new private sector banks. But the percentage of State Bank Group and foreign banks, the number of ATMs installed has declined to 29 per cent (55.8 per cent) and 357.3 per cent (377.4 per cent) respectively.
Out of all the ATMs installed in the country by the March-end 2009, the new private sector banks have the largest share in off-site ATMs (7,480), whereas the nationalised banks had the largest share in on-site ATMs (10,233).
RBI caution banks regarding decline in CASA banks’ total deposits
The Reserve Bank of India (RBI) has cautioned banks regarding the decline in share of current account and savings account balances (CASA) in banks’ total deposits. The apex bank said decline in CASA might create a defying situation for the banking sector as CASA deposits is the cheapest source of funds for banking sector.
In case of public sector banks the share of CASA in total deposits keep on declining as large numbers of account holders are transferring their savings to fixed deposits.
In the quarterly report on trends and progress of banking in India RBI has cautioned banks, “In case of drying up of this source alternate sources may be difficult and expensive. In the context of the impending revival of economic growth with commensurate increase in the credit needs of the economy, the banking industry may require to take initiatives to attract more CASA deposits”.
According to a senior SBI official, “While CASA in absolute terms has not come down for the public sector banks but in percentage terms it has dipped as public sector banks mobilized a lot of term deposits last year which resulted in CASA as percentage of total deposits going down. While in private and foreign banks, the CASA ratio has improved as they did not mobilize term deposits”. In case of SBI out of the total deposits, the share of term deposits is 60 per cent, wholesale deposits form 15 per cent while the remaining is CASA.
While in case of Schedule Commercial Banks (SCBs), by the end of March 2009 the CASA deposits has recorded a growth rate of 13.4 per cent as against of 20.2 per cent in the preceding year, registering a decline in growth. In nationalized banks growth of CASA deposits has recorded a marginal decline, in case of private sector banks and foreign banks there has been steep fall. In 2008-09 for SBI and its associates, growth of CASA deposits stood at the same level as in the previous year.
In case of foreign banks the share of current account deposits is higher than saving bank deposits, while for other bank groups, the share of saving bank deposits is higher. Further, by the end March 2009, the share of demand deposits in CASA deposits had declined, in comparison to the preceding year for all the other bank groups. In growth terms, current deposits and saving bank deposits have shown an increase of 6.7 per cent and 17.4 per cent in March 2009 as against to 24.6 per cent and 17.8 per cent in March 2008.
In case of public sector banks the share of CASA in total deposits keep on declining as large numbers of account holders are transferring their savings to fixed deposits.
In the quarterly report on trends and progress of banking in India RBI has cautioned banks, “In case of drying up of this source alternate sources may be difficult and expensive. In the context of the impending revival of economic growth with commensurate increase in the credit needs of the economy, the banking industry may require to take initiatives to attract more CASA deposits”.
According to a senior SBI official, “While CASA in absolute terms has not come down for the public sector banks but in percentage terms it has dipped as public sector banks mobilized a lot of term deposits last year which resulted in CASA as percentage of total deposits going down. While in private and foreign banks, the CASA ratio has improved as they did not mobilize term deposits”. In case of SBI out of the total deposits, the share of term deposits is 60 per cent, wholesale deposits form 15 per cent while the remaining is CASA.
While in case of Schedule Commercial Banks (SCBs), by the end of March 2009 the CASA deposits has recorded a growth rate of 13.4 per cent as against of 20.2 per cent in the preceding year, registering a decline in growth. In nationalized banks growth of CASA deposits has recorded a marginal decline, in case of private sector banks and foreign banks there has been steep fall. In 2008-09 for SBI and its associates, growth of CASA deposits stood at the same level as in the previous year.
In case of foreign banks the share of current account deposits is higher than saving bank deposits, while for other bank groups, the share of saving bank deposits is higher. Further, by the end March 2009, the share of demand deposits in CASA deposits had declined, in comparison to the preceding year for all the other bank groups. In growth terms, current deposits and saving bank deposits have shown an increase of 6.7 per cent and 17.4 per cent in March 2009 as against to 24.6 per cent and 17.8 per cent in March 2008.
Wednesday, October 21, 2009
RBI launched outreach program to educate villagers about banking
The Reserve Bank of India (RBI) has been working to take banking to villages. Following this as part of its platinum jubilee celebrations, has launched an outreach program in the country to educated villagers about banking and its benefits.
In view of this RBI is in a process to develop Khopi, located 30 kilometers from Pune, as a model village with an aim to encourage every villager to open his/her own bank account. Later on the same model will be replicated in other villages. In addition to Khopi, eight more villages around Pune including Kalyan, Shivare, Vinzer, Kusgaon, Shivapur, Kelad, Sangvi and Velhe have been selected for the outreach program.
The RBI has chosen Khopi for its pilot project due to specific reasons. Not only that villager does not have bank accounts, there is not a single doctor in Khopi. People have to go to Pune for every small medical necessity. Thus when Maya More, an MBBS aspirant contacted RBI to get an education loan, the apex bank readily accepted her request.
Maya belongs to a poor family and can not pay for medical study until the RBI gave her an education loan.
Maya was given an amount of Rs 2.80 lakh for the next five years after which she obtained admission into Bharati Vidyapeeth Medical College in Katraj.
"My parents are not very well off. We do a bit of farming, but we are hardly able to run a family of four with what we earn. We don't get enough prices for our crops. And studying MBBS is not easy with the exorbitant fees. When I learnt of this scheme, I told my father about it and he willingly agreed to approach the RBI for a loan, which was accepted."
Maya is not the only one to get the loan. Kamala Rajan, chief general manager and principal of College of Agricultural Banking (CAB), RBI told, “There are several self-help groups (SHG) operating in the villages. In order to strengthen their business, SHGs also need loan but they do not have access to banks as they are unaware of the concept. As part of our drive, we are trying to tell them what banks are, what it means to create an account, how to take loan, repay them among other things".
Under the program, the CAB has been undertaking various programs for creating awareness about financial inclusion among villagers. In view of this, a team of officers from the CAB will be visiting nine different villages in the district till March next year.
In view of this RBI is in a process to develop Khopi, located 30 kilometers from Pune, as a model village with an aim to encourage every villager to open his/her own bank account. Later on the same model will be replicated in other villages. In addition to Khopi, eight more villages around Pune including Kalyan, Shivare, Vinzer, Kusgaon, Shivapur, Kelad, Sangvi and Velhe have been selected for the outreach program.
The RBI has chosen Khopi for its pilot project due to specific reasons. Not only that villager does not have bank accounts, there is not a single doctor in Khopi. People have to go to Pune for every small medical necessity. Thus when Maya More, an MBBS aspirant contacted RBI to get an education loan, the apex bank readily accepted her request.
Maya belongs to a poor family and can not pay for medical study until the RBI gave her an education loan.
Maya was given an amount of Rs 2.80 lakh for the next five years after which she obtained admission into Bharati Vidyapeeth Medical College in Katraj.
"My parents are not very well off. We do a bit of farming, but we are hardly able to run a family of four with what we earn. We don't get enough prices for our crops. And studying MBBS is not easy with the exorbitant fees. When I learnt of this scheme, I told my father about it and he willingly agreed to approach the RBI for a loan, which was accepted."
Maya is not the only one to get the loan. Kamala Rajan, chief general manager and principal of College of Agricultural Banking (CAB), RBI told, “There are several self-help groups (SHG) operating in the villages. In order to strengthen their business, SHGs also need loan but they do not have access to banks as they are unaware of the concept. As part of our drive, we are trying to tell them what banks are, what it means to create an account, how to take loan, repay them among other things".
Under the program, the CAB has been undertaking various programs for creating awareness about financial inclusion among villagers. In view of this, a team of officers from the CAB will be visiting nine different villages in the district till March next year.
RBI suggests banks to keep interest rates stable to ensure economic recovery
In a pre-money policy review meeting the Reserve Bank of India (RBI) governor D Subbarao and the deputy governors told the PSU bankers to keep interest rates stable so that the economic recovery does not get weak.
The RBI said when bankers say increase in the profit on bonds; rising wholesale price inflation and high government borrowings point towards increase in deposit and lending rates therefore they should abstain from random increase in interest rates.
Bankers on their part said they have no tendency to raise rates but due to rising inflation, greater credit demand in the coming months and the government borrowing program taking off Rs 1.23 lakh crore by February, might be forced to raise key rates.
Bankers told the central bank “Taking all these factors into consideration, we may be left with no option but to hike rates”.
The meeting was held ahead of the October 27 monetary policy review, the chief of eight major Indian, private and foreign banks attended the meeting.
RBI issued a paper to the banks in which it had suggested for the exclusion of loans given to sugar mills for on-lending to farmers from priority sector lending, in a response to this the bankers said if they follow this suggestion then it will be difficult for them to meet the priority sector lending target of 40 per cent of total advances also RBI will have to reduce the priority sector target to 20 per cent.
The RBI has planned to categorize lending to sugar mills for on-lending to farmers under indirect finance.
A senior PSU banker who had attended the pre-credit policy meeting said, “If items under priority sector are taken off, then banks will find it difficult to achieve the 40 per cent target”.
In the pre-credit policy meeting between bankers and the RBI loans to priority sector was the major point of discussion.
Earlier, RBI had categorized lending to electricity boards for on-lending to farmers for purchase of motor pumps under priority sector lending. But now these lending has been classified as indirect finance.
The RBI said when bankers say increase in the profit on bonds; rising wholesale price inflation and high government borrowings point towards increase in deposit and lending rates therefore they should abstain from random increase in interest rates.
Bankers on their part said they have no tendency to raise rates but due to rising inflation, greater credit demand in the coming months and the government borrowing program taking off Rs 1.23 lakh crore by February, might be forced to raise key rates.
Bankers told the central bank “Taking all these factors into consideration, we may be left with no option but to hike rates”.
The meeting was held ahead of the October 27 monetary policy review, the chief of eight major Indian, private and foreign banks attended the meeting.
RBI issued a paper to the banks in which it had suggested for the exclusion of loans given to sugar mills for on-lending to farmers from priority sector lending, in a response to this the bankers said if they follow this suggestion then it will be difficult for them to meet the priority sector lending target of 40 per cent of total advances also RBI will have to reduce the priority sector target to 20 per cent.
The RBI has planned to categorize lending to sugar mills for on-lending to farmers under indirect finance.
A senior PSU banker who had attended the pre-credit policy meeting said, “If items under priority sector are taken off, then banks will find it difficult to achieve the 40 per cent target”.
In the pre-credit policy meeting between bankers and the RBI loans to priority sector was the major point of discussion.
Earlier, RBI had categorized lending to electricity boards for on-lending to farmers for purchase of motor pumps under priority sector lending. But now these lending has been classified as indirect finance.
RBI cancelled certificate of registration of three NBFCs
The certificate of registration of three non-banking finance companies has been cancelled by the Reserve Bank of India (RBI). The companies are KNR Finance & Investments Private Limited and Bharat Finance Corporation Private Limited, both of them now cannot continue to do transact business of an NBFC, RBI release stated.
KNR Finance & Investments registered office is located at Channarayapatna at Hassan district of Karnataka. RBI said, it has cancelled the registration under the powers conferred to it under the section 45-IA (6) of the Reserve Bank of India Act, 1934.
The other NBFC whose certificate of registration has been cancelled by RBI is Bharat Finance Corporation Private Limited, who had attained the certificate on 31 August 2009. The registered office of NBFC is in New Delhi.
The certificate of registration of San Components Limited, has also been cancelled by RBI, its registered office is also located in New Delhi.
According to RBI release the company has voluntarily opted to exit from the business of a non-banking financial institution.
KNR Finance & Investments registered office is located at Channarayapatna at Hassan district of Karnataka. RBI said, it has cancelled the registration under the powers conferred to it under the section 45-IA (6) of the Reserve Bank of India Act, 1934.
The other NBFC whose certificate of registration has been cancelled by RBI is Bharat Finance Corporation Private Limited, who had attained the certificate on 31 August 2009. The registered office of NBFC is in New Delhi.
The certificate of registration of San Components Limited, has also been cancelled by RBI, its registered office is also located in New Delhi.
According to RBI release the company has voluntarily opted to exit from the business of a non-banking financial institution.
Wednesday, October 7, 2009
Soon you will see Plastic currency notes in India
Everyone is familiar with word plastic card but now it is plastic currency notes. Yes Reserve Bank of India is planning to introduce polymer, or plastic, currency notes in the country.
From sometime the RBI has been working on the idea of replacing paper currency with polymer notes as the paper notes wear out very quickly due to mishandling and it is not possible for the central bank to print the currency very frequently especially because of security reasons.
In the beginning, the central bank informed has decided to introduce 100 crore (1 billion) pieces of Rs 10 polymer notes, and for this the bank has floated a global tender.
The interested parties have been asked to send 500 pieces of sample banknotes, before the apex bank actually floats the global bids for the main project.
From sometime the RBI has been working on the idea of replacing paper currency with polymer notes as the paper notes wear out very quickly due to mishandling and it is not possible for the central bank to print the currency very frequently especially because of security reasons.
In the beginning, the central bank informed has decided to introduce 100 crore (1 billion) pieces of Rs 10 polymer notes, and for this the bank has floated a global tender.
The interested parties have been asked to send 500 pieces of sample banknotes, before the apex bank actually floats the global bids for the main project.
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