Tuesday, December 28, 2010

RBI advises Co-ops to follow KYC norms

Reserve Bank of India has advised the co-operative banks to follow the Know Your Customers (KYC) norms more strictly. According to the bank it will prevent the illegal funding for terrorist and criminal activities and will be beneficial for the bank also to keep proper record of their customer.

RBI said "It has been brought to our notice that 'Money mules' can be used to launder the proceeds of fraud schemes (e.g phishing and identity theft) by criminals, who gain illegal access to deposit accounts by recruiting third parties to act as 'money mules',"

In a money mule transaction a person with a bank account is recruited to receive cheques, the person has to transfer money from his account to another account. These money mules are recruited by various methods including spam e-mails.

Many a times the account holders are found innocent but sometimes the account is found to be a fake or not up to date. That is why it becomes hard to locate such account holder. Such practices can be checked if the banks properly follow the Know Your Costumer guidelines.

In a statement RBI said to the executives of central and co-operative banks "State and central Co-operative Banks are, therefore, advised to strictly adhere to the guidelines on KYC/AML/ CFT...in order to protect themselves and their customers from misuse by such fraudsters

Monday, December 20, 2010

Hike in interest rates further expected

Reserve bank of India has warned that the inflation rate is still well above the comfort level and unveiled steps to address persistently tight liquidity, and further added that it it will maintain monetary tightening in January too.

Reserve bank of India has already raised the interest rates six times since march in order to fight rising food costs in a economy that is growing at nearly 9 % per annum..

"The very hawkish tone of today's statement has persuaded us that the next repo and reverse repo rate hike is most likely to come at the RBI's next meeting on 25 January," said Robert Prior-Wandesforde, an economist at Credit Suisse in Singapore.

Still, bond yields and swap rates tumbled after the RBI announced steps to cut the statutory liquidity ratio (SLR) -- the minimum level of deposits banks must hold in government approved securities -- to 24 per cent from 25 per cent, and unveiled $10.6 billion worth of bond purchases over the next month.

Indian is not the only country that is dealing with this severe problem of inflation. The neighboring country china recorded inflation rate at 5.1 per cent at the end of the month of November. It was their highest in pat 28 months.

"There is a risk that rising international commodity prices will spill over into domestic inflation. Going forward, rising domestic input costs for the manufacturing sector combined with aggregate demand pressures could weigh on domestic inflation," the RBI said in a statement.

Due to tight liquidity conditions the banks are forced to borrow around 1 lakh crore per day from RBI,. This decreases their capacity to act as a inflation fighting tool. After the buyback of the bonds it is very much expected that RBI intends to infect liquidity into the system.

"RBI wants to address liquidity first and then get on to hiking rates. After these measures, we expect liquidity to come back to comfortable zones by January," said Ananth Narayan G, head of fixed income, currencies, commodities for South Asia at Standard Chartered in Mumbai.

"Earlier we were expecting liquidity to do the job for RBI and they wouldn't need to hike rates in January, but now it seems if inflation remains high, RBI may hike rates in January," he said.

Friday, December 17, 2010

Govt to review fin. Inclusion plan of banks

Indian economy is the world’s second fastest growing economy. The banking sector of the country is so well organized that even the world crisis could not effect it.

There are very few villages in the country that have banks. Most of the rural population in India is still not able to enjoy the benefits of banking.

So, the Government of India introduced financial Inclusion Plan, in order to bring financial literacy amongst the masses. The Reserve Bank of India has asked the banks to extend their services to every village above the population of 2,000. According to the top official of a private sector bank, most of the banks have already started working in this direction.

But the banks working in this direction are facing some difficulties in their mission of financial inclusion. The literacy rate amongst the people in rural India is very low. With low availability of banks in the villages people have to go for more expensive options.

As the literacy rate in the villages is low, it makes very difficult for the intermediaries to make the population aware of the financial services of the bank. It is rather not very profitable deal for the banks too, as they do not find sufficient business volumes.

As most of the villages in India still lacks in basic infrastructure, the banks find it very difficult and expensive to provide their services to the rural population.

Tuesday, November 9, 2010

RBI will hold exhibition to create awareness about foreign exchange from Nov 12

The Reserve Bank of India is holding an exhibition, `Foreign Exchange and You', for general public with an aim to educate them about the availability of foreign exchange. The exhibition will be for two days 12 and 13 November in Lucknow.

Regional director, RBI Amrendra Sahu said, "We have found that the level of awareness about foreign exchange and the facilities available to masses is relatively low in Tier-2 cities. After a successful run in Hyderabad, this exhibition is now being organized in Lucknow.''

Deputy governor RBI, Shyamala Gopinath will be attending the two day event and will be participating in a public interface about foreign exchange matters. Besides RBI, public and private sector banks dealing in foreign exchange will be participating in the two day event. Sahu said, "The exercise is a part of RBI's financial literacy program. Earlier, only exporters, importers and corporates were invited to attend. Under the Foreign Exchange Management Act, RBI has offered a large number of relaxations relating to foreign exchange. Though this platform, RBI will be able to disseminate this information to the general public as well.''

During the event key issues which will be addressed include FEMA violations, rules of foreign direct investments in India, foreign exchange facilities available to residents and non-resident Indians, overseas direct investment as well as issues related to fraudulent email and SMS messages are sent offering large sums of foreign exchange. Sahu said, "A large number of cases, where fake RBI letter heads and certificates were used for such fraudulent practices, have come to light. The bank has already issued notifications asking people to be careful of fictitious mails offering money. At the exhibition, people will have the opportunity to have all such doubts clarified.''

Monday, November 8, 2010

RBI tells banks to educate customers about e-payment options

In spite of automated teller machines (ATM) and net banking facilities, also new technologies are being adopted by banks to provide better services and facilities to their customers still customers stand in long queues in front of teller counters in banks. The Reserve Bank of India (RBI) has instructed group of top bank executives to promote use of electronic transactions among customers so that long queues can be reduced.

In a meeting with bank executives RBI told executive directors of select state-run banks to provide information to their customers about other options such as real-time gross settlement, national electronic funds transfer, and electronic clearing service, for transactions.

An anonymous bank executive who attended the meeting told, “RBI told banks to improve the penetration of electronic payment systems during a meeting to review the present situation.” Executive directors of Allahabad Bank, Bank of Baroda, Bank of India, Central Bank of India, Dena Bank, Punjab & Sind Bank, Syndicate Bank, UCO Bank and Vijaya Bank were at the meeting presided over by RBI chief general manager G Padmanabhan.

The central bank said though paper-based system will continue to dominate but, banks must try to increase electronic payment options in terms of the value of transactions. While about 90% of all banking transactions are done electronic payment options in terms of value, although in terms of number of transactions the share of electronic payment is just about 35%. Some of the banks are educating their customers and helping them in adopting the electronic options.

From the past few years, RBI has been encouraging banks to adopt electronic payment products that are better to paper-based systems in terms of traceability, efficiency, speed and safety such as RTGS is for high-value transactions, NEFT and ECS are for small amounts.

However the use of paper-based instruments has been reduced both in volume and value terms. According to RBI paper-based solutions will dominate in terms of numbers and has launched a speed-clearing system to streamline the process and reduce the time taken for collection of outstation cheques. Currently speed clearing system is available for MICR (magnetic ink character recognition) cheques at 66 MICR cheque processing centers across the country.

Wednesday, October 27, 2010

RBI mandates folowing KYC norms for banks

The Reserve Bank of India has issued new norms to banks in a bid to keep check on money laundering. RBI has instructed banks apart from getting certification by employer, they should ask for valid documents at the time of opening accounts of salaried employees.

A circular issued by RBI stated to reduce the risk of fraud banks have to rely on certification only from corporate and other entities of repute and so they must have proper information of the competent authority designated by the concerned employer to issue such certificate or letter.

Besides the certification from employer, banks must mandatorily ask for at least one of the officially valid documents as provided in the Prevention of Money Laundering Rules namely passport, driving license, PAN Card, Voter’s Identity card, etc, it said.

The circular stated banks can accept utility bills as valid document for know your customers (KYC) purposes for opening bank account of salaried employees of corporates and other entities.

It said, in case of any violation or non-compliance of the norms by any bank will attract penalties under Banking Regulation Act.

RBI said, it has been noticed that some banks for opening bank account of salaried employees of corporates, rely on certificate or letter issued by the employer as the only KYC document for the purposes of certification of identity as well as address proof.

Wednesday, October 13, 2010

New Rs 5 and Rs 2 coins to bear CWG logo

The Reserve Bank of India (RBI) will be launching new Rs 5 and Rs 2 coins bearing the 19th Commonwealth Games logo.

The RBI said on the reverse side of both the coins logo will be embossed at the centre, with the words - ‘‘XIX Commonwealth Games, 2010-Delhi” — in English and on the left upper periphery, it will be written in Hindi. Below the logo in international numerals and English the date will be written – “3-14 October 2010”.

As per Indian Coinage Act, 1906 coins are legal tenders. The RBI said, ‘‘The existing Rs 5 and Rs 2 coins in circulation will also continue to be legal tenders.”

Tuesday, September 21, 2010

Reserve Bank of India launches RBI Young Scholars Award Scheme for students

The Reserve Bank of India (RBI) has launched the RBI Young Scholars Award Scheme to develop interest and awareness about the Indian banking sector and RBI. RBI will conduct entrance exam in English, Hindi and 11 other regional languages and will select a maximum of 150 young scholars and award a scholarship.

Selection test will focus on the role and functions of RBI and banks in India. The selected candidates will be placed at the nearest Regional Office designated for the purpose, depending on the size of the office where these candidates will work on projects for 2 to 3 months and will be paid a consolidated stipend of Rs 7,500 per month during the duration of the project. The outstation awardees will be assisted by RBI in boarding and lodging during the program.

All students, between 18 and 23 years of age, who are currently pursing their undergraduate studies in any subject under any recognized university in India, are eligible to take up this competitive examination. The students can apply either online or offline. The prescribed application form is available on http://www.rbi.org.in/youngscholars.aspx. There is no fee for application or examination. For more information, visit www.rbi.org.in.

Friday, September 17, 2010

RBI hiked repo rates, banks to raise home and auto loans by 25-50bps

The Reserve Bank of India’s (RBI) has hiked its key policy rates —repo rate (the rate at which it lends to commercial banks) by 25 basis points (bps) to 6% and reverse repo rate (the rate at which banks park excess cash with RBI) by 50 bps to 5%. As a result in October, consumers will have to pay more on home and auto loans. The bankers will be raising lending rates anywhere between 25 and 50 basis points. One basis point is equal to one hundredth of a percentage.

There is good news for investor’s banks will be increasing deposit rates as the banks have been witnessing sluggish growth in deposits at just about 14%.

SS Ranjan, chief financial officer, State Bank of India, said, “RBI move clearly signals an upward bias on interest rates. We will decide on a possible revision in rates in our asset and liability committee (ALCO) meeting,'' and added, “The quantum of the rate hike will depend on how the cost of funds and demand for credit pans out.''

MV Nair, chairman and managing director, Union Bank of India, said, “We expect credit demand to pick up in October as the busy season kicks in and there will be pressure on liquidity which will lead to rise in interest rates. We will review our base rate and benchmark prime lending rate in October.''

Dipak Gupta, executive director, Kotak Mahindra Bank, pointed out, “Interest rates will move up and we may increase our interest rates both deposits and lending to 25 basis points.''

http://static.expressindia.com/expressindia/newpic/nor.jpgAccording to Ashish Parthasarthy, head (treasury), HDFC Bank, “There is every possibility that base rate will be revised to the extent of 25-50 basis points.'' There would be another round of deposit rate hikes of 25 basis points across the board but not immediately.”

According to Keki Mistry, vice-chairman & CEO, HDFC, increase of 25bps in repo rate will not have any significant impact on long term rates. “Immediately there will be no increase in rates as the market had factored in a 25 basis point hike in repo rate. I expect RBI to now take a pause as inflation is easing,'' said Mistry.

The Housing Finance Company- which is facing tuff competition from public sector bank like State Bank of India- has recently introduce a dual rate home loan product. Under this scheme company is offering a fixed interest rate of 8.50% per annum up to March 31, 2011and of 9.50% for period between April 1, 2011 and March 31, 2012 and consequently the interest of rate of the remaining loan tenure will be at a floating rate.

PC John, executive director, Federal Bank, points out, “Overall interest rates are likely to go up. We may increase our deposit and lending rates to the tune of 25-50 basis points. At the same time, if credit demand does not pick, it would not be feasible to hike interest rates upfront.''

On the other hand RVS Sridhar, president and head, global markets, Axis Bank, said, “We believe any further rise in deposit and lending rates will be limited. Deposit rates already moved up in anticipation of RBI rate hikes in the last 1-2 months. It may not be necessary to hike rates immediately.'' “The question of increasing lending rate comes in when our cost of funds goes up. However, we need to keep watch on industry trends and if needed, would revise interest rates,'' added Sridhar.

MD Mallya, chairman and managing director, Bank of Baroda also confirmed his bank will review the base rate by the end of the quarter.

To control the rising inflation the central bank has raised the policy rates for the fifth time this year in its first mid-quarter review of the monetary policy. The RBI in its press release said, “Inflation remains the dominant concern in macroeconomic management.”

In August the wholesale price base inflation had increased to 8.5% from a year earlier, while in July it was at 9.8%, the commerce ministry told on September 14. The hike in repo rates will result in rise in cost of funds for the banks and in long term the loans become expensive. Bankers are expecting to raise lending rates by 25-50 basis point when the base rate will be reviewed in October.

By the end of August 27, 2010, there was a slip in lending to corporate and individuals by commercial banks. It had slipped little below 20% , the target set by the Reserve Bank of India in 2010-11. However, in August most of the commercial banks had hiked their deposits and lending rates in the range of 25-75 basis points. The banks raised the rates after RBI had hiked the repo rate by 25 basis points to 5.75% and the reverse repo rate by 50 bps to 4.50% on July 27.

Thursday, September 9, 2010

RBI says, mobile banking to get popular with customers

In October 2008 the Reserve Bank of India had given permission to 18 banks including SBI, ICICI Bank, Bank of India, HDFC Bank, Axis Bank and Union Bank of India, among others to offer mobile banking to their customers in the country. According to apex bank reports after two years the average number of monthly intra-bank transactions has remained extremely low at just 4 lakh among all 18 banks.

Speaking in a banking summit, organized by Indian Bankers’ Association (IBA) and FICCI, KC Chakrabarty said the mobile banking still have to pick up with customers, as most of them are wary of mobile banking.


Chakrabarty said, “As on date, only four lakh intra-bank mobile transactions are happening on an average every month.” He informed out of the four lakh transactions carried out through mobile banking every month, three lakh is done by one bank. He further said in some banks average transactions via mobile banking is as low as 2 per month.

As industry expert informed that mostly small ticket transactions such as postpaid bill payment, credit card bill payment and prepaid mobile refill are done through mobile banking. An anonymous official told, “The average ticket size of such transactions is Rs 230-250.”

Chakrabarty said, “The average cost of banking has not come down and, hence, it is a chicken and egg situation where we can’t get volumes till cost comes down and cost will not come down till volumes are achieved.” AP Hota, chief executive officer of National Payment Corporation of India (NPCI), told the national payment gateway provider is doing pilot project on inter bank mobile banking platform with banks. Hota said, “We are doing the pilot with four banks, namely SBI, ICICI Bank, Bank of India and Union Bank of India. Once three more banks — Axis Bank, HDFC Bank and Yes Bank — get RBI nod, we will launch this platform in October officially.”

Monday, August 16, 2010

RBI issued circular to banks related to safety of customers’ lockers

There has been increase in instances of bank robbery in view of this the Reserve Bank of India has issued a circular to the commercial banks in which it has suggested the banks to review the system in force for operation of safe deposit vaults/lockers at their branches and should take required necessary steps. The apex bank has advised, “The security procedure should be well-documented and the staff concerned should be properly trained in the procedure. The internal auditors of the bank should ensure that the procedures are strictly adhered to.”

In the circular the apex bank has not given any specific recommendations on the sensitive issue, whether banks are liable to compensate the customers in case of burglary of locker. According to RBI circular the relationship between the bank and the locker hirer is like the “bailor and bailee” and not “landlord and tenant”.

The commercial banks have been shedding off all claims of their shoulders in case of locker burglary. The banks say the relationship between a bank and the person hiring the locker in one of landlord and tenant. As per legal argument by the banks there is no “entrustment” of contents placed in lockers by the depositors to the bank, thus the banks are not responsible for its contents.

In one of the case related to locker robbery the National Consumer Disputes Redressal Commission (NCDRC) rejected banks’ argument that depositors were the only tenants of the lockers therefore banks can not be held liable for any loss suffered by them.

Earlier on July 11, 2000 NCDRC in its order given in a case involving locker robbery in one of the branches of Bank of Maharashtra, had rejected the bank’s argument and held that “the depositors had taken the lockers on rent only because of the security provided by the bank and it is not simply a landlord and tenant relationship.” The Commission further said, “The depositors have kept jewellery and other valuable articles on the assurance that the bank will provide complete security...” The NCDRC order had said, “Another important aspect of the case is that the depositors cannot have access to the lockers except with the help of the bank because one key is retained by the bank and unless both keys are used, the depositors cannot open the lockers. We have consistently held that the relationship between the bank and depositor is not that of the landlord and the tenant.”

Thursday, August 12, 2010

RBI issues discussion paper on new banking license

The Reserve Bank on Wednesday issued discussion paper for the entry of new private sector banks in which it proposed to bring down the foreign investment in new private sector banks to below 50% from 74%. It is believed this suggestion of RBI can help some lenders in retaining their Indian-owned status as two leading private sector lenders- ICICI Bank and HDFC Bank had lost the status of Indian-owned banks.

RBI said, "Since the objective is to create strong domestic banking entities and a diversified banking sector ... aggregate non-resident investment, including FDI, NRI and FII in these banks could be capped at a suitable level below 50% and locked at that level for the initial 10 years."

The two private sector lenders ICICI Bank and HDFC Bank have been categorized as foreign-owned, Indian-controlled lenders, as FDI in them had increased over 50 per cent when norms on calculating FDI changed to include all types of foreign investment including FDI, FII, NRI, ADR, GDR and foreign currency convertible bonds.

Possibly the new norms of calculating FDI might have repercussions on their downstream investment like in subsidiaries.

According to discussion paper the downstream investment of banks would not have impact on monitoring indirect foreign investment, if the foreign investment is below 50%.

But experts say, it is not clear whether these proposals if implemented will they cover existing banks or not.

KPMG Financial Services Tax Leader Punit Shah said, "It is not clear. However, it is possible that even the existing banks will have to comply with the new cap over a period of time for a level playing field."

Giving basis for putting restriction on foreign investment at 50%, the discussion paper said, "This would enable foreign capital to be used in the promotion of domestic banks ... This would allow for foreign technical collaboration in setting up domestic banks."

RBI released discussion paper on issuing new banking licenses to increase competition and expand the banking system. It has mentioned pros and cons of various norms such as minimum capital requirements and limits on promoters as well as foreign shareholding.

Currently RBI is taking into consideration applications from 18 foreign entities, including Goldman Sachs, Morgan Stanley, Industrial and Commercial Bank of China (ICBC) and National Australia Bank to start operations in India.

By year-end polymer notes of Rs 10 denomination will be in circulation

By the year-end, the Reserve Bank of India (RBI) is planning to introduce polymer (plastic) notes of Rs10 denomination and later on it will introduce such notes of other denominations. The apex bank has planned to introduce polymer notes because the paper notes with time get soiled, washed, partially torn and mutilated and such notes volume is increasing and the cost of production is very high.

RBI sources said, “We will start with Rs. 10 notes on an experiment basis and then based on it, Rs. 20 and Rs. 50 notes will also be issued.”

Polymer notes are in circulation in countries such as New Zealand, Sri Lanka, Malaysia and Hong Kong. The sources said these countries have additional capacities to produce plastic notes.

The sources said, “The RBI could have imported plastic notes from these countries but after some consideration we have decided to produce them internally.” Currencies of Rs.10 are in maximum circulation and its production cost is more compared to notes of other denominations.

Regarding the fake notes, he said that though there were “no cases of such notes in Rs. 10 denomination, plastic notes would have enough safety features.”

The sources informed that RBI has no plans to issue plastic notes of Rs 5 denominations it is focusing more on its coins.

Tuesday, August 10, 2010

FM accepts banks not following RBI norms for opening no-frill accounts

Finance Minister Pranab Mukherjee has accepted in Lok Sabha that some banks are not following guidelines on opening no frill zero balance accounts in rural areas. He said efforts are being made to provide banking facilities to remotest part of the country through various means.

The finance minister said some of the banks might not be observing guidelines of the RBI in opening no-frill, zero balance accounts in rural areas. He added banks have been told to listen to the political leadership and the state governments in addressing the grievances of the people.

Several members across political parties supported finance minister views.

He added he has been receiving request from Chief Ministers that meetings of state level bankers should be held. Likewise officers have been instructed to hold meetings with bank officials at the district level in order to eliminate the role of the middleman.

He said, there is a need for a “vigilant mechanism”, therefore branch officers are being made accountable.

In a reply to another question, Minister of State for Finance Namo Narain Meena ruled out any special incentives for bank officials deployed in rural areas. He said, "It is part of their normal work."

Monday, July 26, 2010

Commercial banks don’t require approval from RBI to open mobile branches in villages

On Friday the Reserve Bank took another major step towards bringing about financial inclusion by allowing the commercial banks to open mobile branches without its approval in areas with less than 50,000 population.

In a notification issued by the central bank said, “It has been decided to further liberalize the branch authorization policy and grant general permission to domestic scheduled commercial banks (other than RRBs) to operationalise mobile branches in tier 3 to tier 6 centers (with population up to 49,999 as per Census 2001) subject to reporting."

This move of RBI will help banks to take banking services to unbanked areas and help promoting financial inclusion.

The notification said, the mobile branch scheme is likely to extend banking facilities through a well protected van having two or three officials of the bank sitting in it with books, safe containing cash etc.

The central bank said, the mobile branch will visit only marked places on the specific days and it will not visit the villages or centers where there are cooperative banks branches and are being served by regular branches of commercial banks.

The notification said the van will be stationed in each location for a reasonable time on specified days and specified hours so that people can use its services easily and properly. It also added the record of the business transactions at the mobile branch will be kept in the books of the base branch or data center.

It said, it has also been decided that general permission will be given to scheduled commercial banks (other than RRBs) to operate mobile ATMs at places identified by them and for this they don’t need to take any prior permission from the Reserve Bank.

Monday, July 19, 2010

RBI says, banks cannot declare your account ‘inoperative’

Many of us don’t know about norms which have been formulated by the Reserve Bank of India (RBI) to protect our interest and rights which bank tend to flout. One of the norms is on ‘inoperative accounts’.

If you have not operated your bank account for a long time there is every possibility of your bank to flout the instructions given by RBI and declare your account as ‘inoperative’ without giving you any notice and even dishonoring your cheques issued on that account.

To protect your interests, you must know what exactly the regulator says, firstly, RBI says an account (both savings and current) can be treated as ‘inoperative account’ or ‘dormant’ only if there are no customer-induced transactions in the account for more than two years.

It also states that if interest from a fixed deposit is being credited into the account, then it should be considered as customer –induced transaction and should not be considered as a dormant account.

More important, the RBI circular issued on August 22, 2008 related to “Unclaimed deposits/Inoperative accounts in banks”, to all scheduled commercial banks urges banks to be pro-active and contact customers whose accounts have remained inoperative for over a year and find out why there are no transactions.

If the consumer has changed his residence or place of work, then most probably, his account will remain dormant. There are also consumers who keep accounts in their hometown and do not operate them regularly.

Therefore the RBI has instructed banks to not only contact customers who have not operated their account for a long time, but also transfer the money in the account to the new account of the customer, if the customer has shifted residence (or changed the job) and opened an account in another bank.

The RBI has also made mandatory for the banks that they should inform customers before declaring an account as dormant and give the account holder sufficient time to the customer to operate the account. If all such efforts fail, then only bank should declare an account as inoperative.

In case the customer contacts the bank after an account has been declared as dormant, then bank should facilitate reactivation of the account after verifying the signature and the identity of the account holder.

In this process bank must ensure the customer should not face any difficulty and inconvenience also no charges should be taken for activation, the RBI says.

After all these norms, still we find banks are exploiting the ignorant customers and violating them with impunity.

Friday, July 16, 2010

The Indian rupee gets new design

Emperor Sher Shah Suri first issued the rupiya. The modern India has adopted most of its national symbols and motifs from it. In the near future the country might be having a new symbol to denote its currency.

Which used to be once a medieval silver coin has aspired to be a major global currency alongside the US dollar ($), the British sterling pound (£), the euro (e),the yen (¥) and the renminbi. Last year government decided that Indian rupee should be uniquely identified and instantly recognized, so it announced a contest to select a symbol to replace the notation Rs. The word rupee and the notation Rs is being used by other countries in the region, such as Mauritius, Nepal, Pakistan, Seychelles, and Sri Lanka.

Among many participants, a shy 31-year-old Tamil Nadu-born researcher, who was also the first Indian scholar to be awarded a PhD in industrial design, for his work on ancient Tamil typography, design of a national symbol will come to be recognized around the world. The new symbol has a combination of Hindi and Roman scripts. Government final decision has come 17 months after the contest was announced.

D Udaya Kumar, the winner of the contest, told ET, “This is possibly the greatest achievement of my life.” Few people get to start their careers on such a professional and creative high.

The Indian rupee has grown in stature since economic and financial sector reforms started in 1991. At present the old symbol is highly recognized in the world market and under the control of the Reserve Bank of India it has remained steady while many major currencies, especially the euro, have been battered by the storm in financial markets. Earlier the rupee exchange rate was Rs 17.5 against the US dollar in 1990, when the country faced a severe balance of payment crisis today rupee is in strong position at 46.21 against the dollar. India’s foreign exchange reserves are now at $279 billion, a stark contrast to March 1990, when the $3.96 billion of reserves were sufficient only for three weeks worth of imports.

However the brand experts have applauded the new symbol. Brand consultant Harish Bijoor said, “The new symbol is an amalgamation of being heritage-oriented and modern. In that sense, it rightly portrays the transformation of India from an underdeveloped country in the past to a fast-developing nation now and a developed one in the future. The new symbol only needs to be marketed well now.” If money-changing counters at airports around the world choose to add Udaya Kumar’s symbol to their display boards can be a good measure of the currency’s global reach. Though, the new symbol will gain currency gradually. Man working at IIT Guwahati design labs will be proud and happy watching it happens.

Tuesday, July 13, 2010

RBI sought help from CBI to curb fraud through ‘phishing’

Recently in one of the incidence Radha Nair (name changed), a 35-year old government employee in Coimbatore, got an email from an unknown person posing to be a senior officer of the Reserve Bank of India (RBI) congratulating her for winning an international lottery prize worth $500,000 (Rs 2.3 crore). There was little content. Nair had to provide her personal bank account details for the money to be remitted and also make a “small” upfront payment for processing and miscellaneous administrative costs. Nair fell for the trap and she mail back her bank details and made the payment but later she found that she had been duped of Rs 6.5 lakh.

Nair told HT on phone, “I have promised myself to visit a bank branch to withdraw money by signing a cheque leaf.”

Nair is not the only to get such email. In last four years, there has been increase in such instances of banking fraud through “phishing”.

‘Phishing’ is a fraud where criminals create e-mails and web sites that closely resemble those of legitimate companies.

However between January 2006 and September 2009, 1,436 cases of fraudulent Internet money transfer cases involving Rs 15 crore have been reported.

To stop the menace, RBI has sought help from the cybercrime cell of the Central Bureau of Investigation (CBI’s). H.R Khan, executive director, RBI said, “There has been a significant rise in the number of these mails. It is a cause for concern and needs to be addressed.”

Generally the fraudsters through these e-mail lure people by promising an astronomical amount either for wining a lottery or for helping to secure a deceased emperor’s wealth.

In some cases, these mails have almost identical web-addresses of banks such as the Punjab National Bank (see attached file) to establish credibility and extract bank account details.

Worried about such email, banks have cautioned their customers to avoid such mails.

PNB said in a communication to its customers, “We never request for your personal and financial information over e-mail… Beware of fraudulent websites looking similar to PNB’s Internet Banking website.”

Friday, July 9, 2010

RBI say: builders must disclose names of banks they have mortgaged their land & apartments

Once again the Reserve Bank of India (RBI) has issued a master circular on housing finance that builders should publicly disclose names of the banks they have mortgaged their land and apartments too. Earlier also, RBI had issued the similar circular but none of the developers have done this so far, said market sources.

In the circular RBI has instructed banks granting loans for housing projects to ensure that builders or construction companies disclose in pamphlets, brochures and advertisements in news paper whom they have mortgaged their property to. The circular stated, "The builder will indicate in their pamphlets/brochures that they would provide no objection certificate/permission of the mortgagee bank for sale of flats/property, if required."

Sunil Mantri, president of the Maharashtra Chamber of Housing Industry said, "We must honor this stipulation. There should be no harm or difficultly in doing so. There have been complaints that the flat buyer was not aware about the mortgage. This rule will bring more transparency."

Generally builders mortgage their land to get construction loans, and this fact is not disclosed to the consumers when they book flats in such projects. However, sources said most of the builders have not been publicizing these details.

The industry sources say, builders issue allotment letters to flat purchasers even when the flats are mortgaged to banks and financial institutions by the builder. A property expert said, "The buyer has no clue about this because the developer never divulges this information."

He said, "The money paid by the buyer has to go into the account of the bank from whom the loan has been taken by the builder. In most cases, the builder puts this amount into his own bank account without informing the lender bank, this tantamount to a double sale. Every builder is doing this."

In the circular RBI has instructed banks not to release funds if builders do not comply with this directive. Earlier the Bombay High Court had said that banks giving finance to housing projects should insist on disclosure of the "charge or any other liability on the plot, in the brochure, pamphlets etc, which may be published by developer/ owner inviting public at large to purchase flats and properties". According to expert’s builder defaults in repaying the bank after the flats are sold and the building occupied, on the other hand bank can take over a portion of, a garden plot in the society. Also the society might find difficulty in getting the land conveyed in its name.

The RBI has also warned the banks to restrain from "excessively risky lending by exercising selectively and strengthening loan approval process". It said, "Banks should ensure that borrowers should have obtained prior permission from government/statutory authorities for the project, wherever required. While the proposals could be sanctioned in normal course, the disbursements should be made only after the borrower has obtained requisite clearances." As per figures, in India total loans taken by builders amount to over Rs 90,000 crore.

Thursday, July 8, 2010

RBI asks public to be cautious of false mails and letters about lottery winnings

The Reserve Bank of India (RBI) is cautioning public against the false mails and letters being sent to people by some gangs. Recently personnel officer (PO) at the Reserve Bank of India (RBI) in Jaipur, R K Singh received a call from a Hyderabad girl. The girl inquired about "the RBI lottery worth Rs 75-lakh" she had won. She had received the intimation on the letterhead of the Singh.

Some gang is using the names of nationalized banks and RBI to cheat people. Recently RBI office in Jaipur has received several such calls from people complaining that they have received false mails, letters of the RBI and other banks.

Concerned about this menacing trend, apex bank official in Jaipur have started taking measures to control such malpractices and have asked public to give support in this regard, apart from creating awareness among people.

The regional director of the RBI Jaipur office, B P Kanungo told media said the fraudsters are using sophisticated and latest techniques to do frauds and are using fraudulent communication relating to fictitious offers, lottery winnings, remittance of cheap funds in foreign currency from abroad, employment offers, scholarship offers etc.

He added, "These offers are generally made through letters, emails, mobile phones, SMSes etc. Apart from typical modalities adopted in the past the fraudsters are now using certificates, letters, circulars, etc. which are sent through e-mail on letterheads that look like that of RBI and purportedly signed by its top executives or senior officials to make them appear as genuine."

Kanungo told the bank has advised the public to be cautious as fraudsters were using RBI name also, and this the first time such incidence has been reported in Jaipur. To create awareness among people about such incidences, RBI is using all possible ways to educate people about the possible ways through which the gangs can target them.

Kanungo said, "The RBI has cautioned authorized dealer banks against remittances towards schemes involving money circulation, lottery schemes etc. RBI has also issued circulars to create awareness regarding such fraudulent methods. The Know Your Customers (KYC) norms too would be helpful in stopping these malpractices."

In reply to question that why the RBI is not doing investigation of such crime, Kanungo said that the RBI does not have powers to investigate.

He added, "The RBI does not have investigative powers to trace and book the culprits". Kanungo, however, said that the Directorate of Enforcement is the investigating agency under FEMA, 1999.

He said, "A victim should approach the police so that such frauds do not occur in future. In case any individual receiving such an offer could call the FED department of the RBI and check its authenticity or refer to RBI website".

Monday, July 5, 2010

RBI hiked key policy rates by 25 bps to control inflation

The Reserve Bank of India (RBI) has hiked key policy rates — the repo and the reverse repo a month ahead of its next quarterly review of monetary policy to control inflation and to anchor inflationary expectations. RBI has raised repo rates by 25 basis points each. After this raise now the repo or the rate at which banks borrow from the RBI is increased by 5.50% and the reverse repo (the rate at which RBI sucks up excess liquidity from the banking system) is at 4%.

Finance Minister Pranab Mukherjee while supporting the rate hike has called it as desirable. He said “These measures are desirable given that food inflation has risen and credit situation is tight... It is good that RBI has not raised CRR.”

However RBI was relived from the fact that in recent months the economic recovery is strengthening with the manufacturing sector showing increasing growth, but the central bank is worried about rising inflation. In May, the wholesale price index based inflation has increased to 10.2% which is up from 9.6 per cent in April. The RBI said in a statement explaining the rationale for the rate hike, “Food price inflation and consumer price inflation remain at elevated levels.”

Jahangir Aziz, chief economist at JP Morgan said, “This policy action was long over due. I think to sustain economic growth of 8 per cent and above, we should see more of such rate hikes in the coming months. I expect RBI to raise key interest rates again by 25 bps on the day of the monetary policy review on July 27”.

On the other hand bankers say they don’t see any reason for lending rates to move up. SBI’s Deputy Managing Director and Head of Treasury, Anjan Barua, told an agency “We don't expect upward pressure on lending, deposit rates as credit is still not picking up. We expect liquidity to improve substantially in July. I don't expect a major impact of the rate hike on government bonds and OIS on Monday.”

However many bankers were expecting such mid-cycle policy move from RBI much earlier when the banking system was struggling with a liquidity crunch. “It was considered inadvisable to raise the policy rates,” the RBI said, the credit shortage was a result of sudden increase in government cash balances because of huge realization from 3G spectrum and broadband wireless access auction.

Rupa Rege-Nitsure, chief economist at the Bank of Baroda said, “There is enough empirical evidence that the aggregate demand has sharply risen in sensitive sectors like consumer durables and commercial real estate. We have also seen a continuous rise in non-food inflation. Salaries in the private and corporate sector have risen the HRA in consumer price index has risen. All these factors have the potential to stoke inflation further. Therefore, we expect RBI to raise key interest rates by 75 basis points in this financial year. We can expect a 25 bps rise on July 27”.

C Rangarajan, Chairman, Prime Minister’s Economic Advisory Council said RBI reviewed its policy rates a month earlier due to increased inflationary pressure on the economy. “I expect another round of rate hike in the July policy review,” he told a news agency. This month on 27th RBI will be announcing its next quarterly policy review

Friday, July 2, 2010

IBA committee recommendations on service charges sent to RBI

The Reserve Bank of India (RBI) has been receiving complaints from the customers regarding excessive charges being taken by banks for various services. RBI had asked IBA to suggest guidelines on this. IBA asked its Committee for Customer Service, headed by Standard Chartered Bank CEO Neeraj Swaroop, to prepare a report on this. A sub-committee headed by Union Bank of India Executive Director S Raman was tasked with framing the guidelines.

Committee of the IBA has finally prepared recommendations on the fees that banks should charge for basic services such as issuing a draft, remittances or for stop-payment instructions. The committee has been working on this for some months.

The recommendations will be sent to the Reserve Bank of India. A banker who was on the committee said, "The committee members have agreed on caps on charges for different services and once these are approved by RBI, banks will not charge customers above the caps."

The committee was to give recommendation on 27 items categorized as basic transaction services. The charges included- issuing cheque books and drafts, the committee also looked at charges for cheque return, reviving inoperative accounts, issue of duplicate pass books and other items such as not maintaining the prescribed minimum balance. However the charges for special services such as loans and credit cards were not part of the purview.

At present there is a wide disparity in charges being taken by different banks. For instance, public sector lenders such as the State Bank of India (SBI) customer is required to maintain minimum average balance of Rs 1,000 per quarter in regular savings account. While the account holder of private sector bank such as ICICI Bank and HDFC Bank is required to maintain a minimum balance of Rs 10,000. In foreign banks such as Citibank, Standard Chartered and HSBC account holders are required to maintain minimum balance of Rs 25,000 per quarter.

Private and foreign banks have high penalties for non-maintenance of minimum balance. ICICI Bank and Citibank charge Rs 750 per quarter; SBI, only Rs 75 per year for such non-maintenance.

RBI has instructed banks to prominently display their service charges and fees on their website in an RBI-prescribed format. Before 1997, IBA used to formulate guidelines for service charges and fees, later RBI gave banks a freehand to frame their own charges.

Thursday, June 24, 2010

RBI clarifies directives on cheque alteration applicable for NCR

Few days’ back the Reserve bank of India (RBI) had issued directives to bank on alterations on cheques titled ‘CTS-2010 Standards for Cheques’. Due to this directive there was some confusion amongst the people and banks, therefore RBI has given clarification on this matter. RBI said that its recent directive on alterations on cheques is applicable for cheques cleared through the state-of-the-art image-based cheque truncation system (CTS). At present CTS method of clearance of cheques is used in RBI’s clearing house in the National Capital Region (NCR) only that is around Delhi. While in other places mostly MICR method of cheque clearance is used, therefore RBI’s recent directives on alterations in cheques is not applicable for MICR, non-MICR and over the counter (that is cheques used for withdrawing cash) clearances. RBI told the cheque truncation system standards will be effective from 1 December, 2010.


Moreover the norm also stated that ‘‘no changes or corrections should be made on the cheques (other than for date validation purposes, if required). It also said ‘‘for any change in the payee’s name, courtesy amount (amount in figures) or legal amount (amount in words), etc, fresh cheques should be used by customers. This would help banks to identify and control fraudulent alterations.’’

Now as per clarification given by RBI the directives will be applicable only for cheque truncation system clearance in the National Capital Region (NCR), where a pilot project is running. However, originally it was planned cheque truncation system would be implemented in the four metros, and it is yet to be implemented in Mumbai, Kolkata and Chennai.



In the three metro cities, and also at all other RBI clearing houses mostly MICR method for cheque clearance is used. According to RBI’s clarification the directives will not be applicable for banking customers outside of National Capital Region (NCR) so they don’t have to worry about alternations on cheques for now.

Tuesday, June 22, 2010

Trai, RBI reached an understanding on regulation for rollout of m-banking

In India the number of mobile users is increasing every year. Thus introduction of mobile banking in the country will play an important role in providing banking services to the customers easily and this will also help in government's plans of financial inclusion to speed up.

To ensure smooth roll out of mobile banking in the country the Telecom Regulatory Authority of India (Trai) and the Reserve Bank of India (RBI) have reached an understanding on its regulation.

According to the understanding Trai will deal with all interconnection issues and RBI will look into banking aspects like the maximum amount of transaction per day, know-your-customer guidelines and verification criteria, the official sources told FE.

With this the telecom operators feel relived as they had fear of getting caught in a possible regulatory crossfire although they were excited of the fact about the mobile banking. Such fears of telecom operators had gained dominance due to recent arguments between capital market regulator Sebi and the Insurance Regulatory and Development Authority over regulating unit-linked insurance products. Therefore, to resolve this issue late this week, government circulated an ordinance in favor of Irda.

In mobile banking interconnection is an important aspect as telecom networks have to be connected with bank networks, thus the charges payable on these counts and the number of points of interconnection need to be worked out in a manner which leaves no room for dispute. Trai has been authorized for charges as it has the required expertise in the area.

Trai will also be responsible for setting tariffs which consumers will have to pay for mobile banking access. An official involved in the process said, “The areas of work have been neatly divided between the two regulators and we will work with perfect coordination.”

For telecom operators, mobile banking will bring in more revenue also it will help in expanding banks’ reach in rural areas where mobile telephony has made giant strides. In rural areas you can find mobile users but they don’t have bank accounts.

According to data, every year, country’s largest mobile operator Bharti Airtel alone is making Rs 25,000 crore by way of recharge coupons. When mobile banking is launched, people will be able to withdraw cash and transfer funds using their mobile phones.

The government has already given an approval for the framework for the launch of this facility by the banks. Government and RBI have advised banks to start mobile banking services in rural areas by July 31, and complete the process by the end of next year. The government took action on the basis of the report of an inter-ministerial group led by a committee of secretaries.

The group was headed by the secretary, department of information technology and had representatives from the departments, of financial services, post, rural development, Planning Commission, UID Authority, Trai, RBI, department of telecom and the home ministry.

It is expected mobile banking model will enable rural areas mobile phone users to deposit and draw cash instantly into or from their mobile-linked to no-frills bank accounts through a business correspondent having a mobile phone in the village. The important feature of the proposed framework is that funds remain within the banking system throughout and the intermediary does not have custody of the funds even momentarily.

Monday, June 21, 2010

Reserve Bank Governor D Subbarao in his speech laid stress on mobile banking to be driven by banks, not telecom operators, in view of money laundering and terror financing threats.

RBI Governor D Subbarao was speaking at a Banking Technology Excellence awards function hosted by the Institute for Development and Research in Banking Technology (IDRBT). He said, "The Reserve Bank has a clear preference for the bank-led model."

He said, "Given the growing concerns about money laundering and financing of terrorism, a bank-led model is decidedly safer and more sustainable," and added, although a mobile operator-led model helps in stepping up financial inclusion.

Subbarao said the central bank also wants to offer more services to the village people besides remittance facility, through financial inclusion program, and this will be possible only through banks.

He added, "We want our customers to get minimum services like deposit insurance, access to affordable credit and the payment system which only banks can offer."

The governor told that the RBI acknowledge that mobile telephony will play an important role in the value chain and that it is interested that mobile service providers collaborate with banks to provide value-added services.

Speaking about the use of technology in banking, he said in his priority list, the main focus is on to keep customer information confidential and fully secured as there is increase in cyber crimes, phishing-related frauds, identity fraud and misuse of customer information.

Subbarao said, "We proposed to set up a working group on information security, electronic banking, technology risk management and tackling of cyber frauds."

He added, also by looking at the statistics about financial inclusion he does not get the true picture of the situation.

He explained, "Even where bank accounts are claimed to have opened, verification has shown that a significant portion of these accounts are dormant. Very few conduct any banking transactions and even fewer receive any credit."

However RBI has instructed all domestic commercial banks, public and private, to prepare their own financial inclusion plans.

Friday, June 18, 2010

RBI thinking of deregulating savings bank deposit rates

The Reserve Bank of India is thinking of deregulating savings bank deposit rate. At present this is the only rate which is fully administered.

Dr K.C. Chakrabarty, Deputy Governor, Reserve Bank of India, said on Thursday, “We are in favor of deregulating all interest rates, including savings bank. The direction is very clear. But, the decision will be taken after having adequate debate on the issue.”

Except interest rates of savings deposit accounts, non-resident Indian (NRI) deposits, and export credit, all other interest rates are deregulated. Regarding wide variation in the interest rates on savings bank deposits across banks, Dr Chakrabarty said he does not except wide range variation in savings bank rate after the deregulation. At present all banks are giving 3.5 per cent interest on savings bank deposits.

While speaking on the sidelines of a banking summit he said, “This is a highly competitive market. Prices do not vary much. But what will be the rate, what customers will get, will depend on market conditions.”

Dr C. Rangarajan, Chairman of the Economic Advisory Council to the Prime Minister has also favored deregulation of controlled interest rate structure. He said on the sidelines of a seminar that deregulation of savings deposit rates is matter of time.

According to banker’s deregulation of savings accounts will help in better asset-liability management for banks and this will increase competition amongst banks in offering better price which will benefit savings account holders.

Every individual whether businessman or a common man have savings bank account for non-commercial transactions. Besides doing day-to-day banking transactions people earn 3.5 per cent return on the savings they have done. However banks have put some ceiling on the total number of withdrawals permitted during specific time periods. Banks also insist on certain minimum balance to be maintained in savings accounts. The Deputy Governor point out that the series of interest rate deregulation has been an important component of the reform process which has played an important role in greater efficiency in resource allocation.

In the recent times RBI most important reform on the savings bank deposit front has been the payment of interest on a daily product basis which became effective from April 1. Before this, banks used to calculate interest on savings bank accounts on the minimum balance held during the period from the 10th day to the last day of each calendar month as a result depositors earned much less than the prescribed 3.5 per cent interest on their savings.

Tuesday, June 8, 2010

RBI authorizes some nationalized and private sector banks to collect income tax

Seeing the increasing rush of income tax payers this year the Reserve Bank of India (RBI) has increased the number of counters as well as authorized nationalized and private sector banks of the city to collect income tax.

Deputy General Manager banking Rajeev Dwivedi told that this year 144 branches of public sector banks including State Bank of India and four branches of private sector banks have been authorized to collect income tax returns and make arrangements for collecting tax by way of cash or cheque. He added, for the convenience of public the list of banks and their branches have been displayed outside the premises of RBI and also at branches of other commercial banks.

He said, at times there has been increase in the income tax payers at RBI counters, thus keeping it in mind additional counters as necessary have been opened in the bank. On the other hand the income tax payers have been asked to deposit their income tax dues in advance well before the last date to avoid inconvenience.

The general manager has advised the masses to take advantage of the above arrangements.

Friday, June 4, 2010

RBI launches online application tracking system for public

Many people send their applications to the Reserve Bank of India related to various complaints but they don’t get any information about the status of their applications. Therefore, to help people in tracking their applications sent to various departments of RBI, it has launched an online application tracking system (ATS).

RBI said in a release, “Applications made to the various departments of the Reserve Bank of India (RBI) can now be tracked online through the application tracking system (ATS). The Reserve Bank launched the ATS on its website for convenience of the public.”

RBI added, but with this tracking system public will not be able to track complaints made under the Banking Ombudsman Scheme or any other complaints.

It said, “Through this facility, the applicant can then submit an online application, attach related documents, view it and track its movement”.

To track their applications, the applicants will have to register on the RBI website and the system will generate a first time login and password which will be sent to the applicants through e-mail.

Thursday, June 3, 2010

RBI cautions public and banks about fake, cheap funds acquired by fraudsters in its name

The Reserve Bank of India (RBI) has cautioned the public and banks that fraudsters, by misusing name of RBI are duping innocent investors by charging money for fake cheap funds. The apex has asked the people and banks not to fall prey to such fictitious offers.

RBI, through circular issued to banks has cautioned banks that in recent times there has been increase in fictitious offers of cheap funds from fraudsters and these offers are being send through letters, e-mails, mobile phones, SMS, etc.

The Reserve Bank while giving details of the modalities of the fraudsters, informed that to target people, fraudsters are using fake letterheads of the RBI for communication which allegedly have signatures of its top executives/senior officials.

A large number of people have become victims of such teasing offers and have lost huge sums of money in the process.

Chief General Manager, RBI Alpana Killawala said, “It was further brought to the Reserve Bank’s notice that fraudsters sought money from gullible people, under different heads, such as, processing fees/transaction fees/tax clearance charges/conversion charges, clearing fees, etc.”

The apex bank has clarified that any person residing in India found collecting and remitting such payments directly or indirectly outside India is liable to be proceeded against with, for breach of the Foreign Exchange Management Act, 1999 apart from being liable for violation of regulations relating to Know Your Customer (KYC) norms and Anti Money Laundering (AML) standards.

To collect transaction charges etc, the fraudsters open multiple accounts in different banks in the name of individuals or proprietary concerns. They convince the victims to deposit certain amount in these accounts. The amounts are withdrawn leaving victims in a dilemma

Wednesday, June 2, 2010

RBI and finance ministry to scrutinize the corporate bodies before granting banking license

In this fiscal Union Budget finance Minister Pranab Mukherjee had announced that the government intends to give out more banking licenses. This move of govt. was welcomed by many corporate houses who intend to enter into banking especially who are already in finance business. Following this some of the major corporate players have applied for banking licenses.

The finance ministry official told that in order to avoid recently faced situation such as Bank of Rajasthan fiasco, where the Tayal Group held more than 55% stake, which resulted in serious corporate governance issues, the corporate houses who have applied for licenses will come under the scrutiny of both the Reserve Bank of India and the finance ministry so that the entry of players involved in dubious transactions can be restricted.

A finance ministry official privy to the deliberations on the subject said, the books and accounts of all group companies will be scrutinized before they are granted new banking licenses.

Next month RBI will be making public a discussion paper on the norms for issuing new banking licenses to private companies and non-banking finance companies. An anonymous official told, “The banking regulator and the ministry have agreed that there should be a scrutiny of the accounts of those seeking licenses to assertion whether the promoters have defaulted on any loans.”

Few of the leading business groups such as ADAG, IndiaBulls and Tatas have shown keen interest in entering into banking business.

Mr Mukherjee had said, “We need to ensure that the banking system grows in size and sophistication to meet the needs of a modern economy. Besides, there is a need to extend the geographic coverage of banks and improve access to banking services.”

The RBI has already started scrutiny of the books of accounts of the Tayal group and has requested the finance ministry to instruct public sector banks not to issue any fresh loan to the group. An RBI official said, “We had requested the finance ministry to restrict all north-based public sector banks from giving loans to the group till the scrutiny is over.”

The finance ministry will be taking help from other government regulatory bodies before issuing license to the corporate houses to make sure that debt or other financial dealings of license seekers do not have any repercussion on the banking entity. At present RBI has the discretionary power to decide whether a company belongs to the particular promoter group.

As per the existing regulations, the initial minimum paid-up capital for a new bank must be Rs 200 crore and the promoter’s contribution should be at least 40% of the paid-up capital of the bank at any point of time.
According to current law an individual company or its subsidiaries can own a maximum of 10% stake in the proposed new bank.

Friday, May 28, 2010

States cash surplus on rise; RBI ask states to manage cash balances efficiently

The state cash surplus with RBI has risen to about Rs 75000 crore, thus the central bank has asked state governments to manage their cash balances more effectively and should issue a quarterly indicative borrowing calendar which will help them in managing their borrowing better, bank said in a statement.

The statement put on website stated a meeting was held between senior officials of the central bank and state finance ministries for annual discussion.

A state secretary who had attended the meeting told, "There was an appreciation for a little bit of lower borrowing than the ceiling given to states. RBI wants the states to reduce their borrowing to the extent of their cash balances"

The states have also been asked to manage their spending pattern in such a way so that their cash levels don’t rise, he added, on condition on anonymity.

In a statement the central bank said, "The deliberations in the conference primarily focused on issues relating to surplus cash balances of the state governments, projections on market borrowings of the state governments and issuance of quarterly indicative calendars for borrowing by the states".

The central bank is already under the pressure of federal government’s recorded Rs 4.57 trillion borrowing targeted for this fiscal, and it is also concerned about the state’s borrowing which amounts to Rs 6.3 trillion this year, the state official informed.

The central bank official pointed out in case corporate credit picks up, also loan given to 3G, it would be difficult for the market to take up the entire government borrowing, he added.

The meeting was attended by Sudha Pillai, a member of the plan panel, Ashok Chawla, finance secretary, Sumit Bose, secretary for asset sales, Shyamala Gopinath, deputy governor and other state finance secretaries.

Tuesday, May 25, 2010

Banks are on aggressive expansion of their branches as RBI eased license norms

After RBI’s announcement that banks will be allowed to open branches in Tier-III to VI cities and they don’t require to take prior permission for the same, the banks are working on double expansion plans of their branches.

In fact there has been substantial rise in the number of bank branches this after RBI’s announcement.

Earlier in December 2009, RBI has allowed domestic scheduled commercial banks (other than regional rural banks) to open branches in Tier-III to Tier-VI centers (with population up to 49,999) without prior permission. As a result the banks planned to open almost double to open almost double the number of branches this year, as compared to last year.

Punjab National Bank is planning to open nearly 550 branches. Bank Chairman and Managing Director KR Kamath told for about 440 branches it will not require to take license as these branches will be opened in areas with a population of less than 50,000. Like wise, UCO bank is planning to open 140 branches this year, but will have to take licenses for only 89. Chairman and Managing Director of the bank SK Goel said, the opening of new branches might raise its market share to at least 3 per cent from the existing 2.6 per cent.

On the other hand State Bank of India (SBI), country’s largest lender has spent around Rs 100 crore to open 286 branches and 2,521 automated teller machines in the fourth quarter of the last financial year. Also, IDBI Bank has plans to open around 300 branches this year, “substantially” higher than what it had done over the past few years, said an executive.

Thus RBI’s liberalized policy has led banks to go for branch expansion plans with a view to gain market share.

However, last year, the smaller banks set off to get more licenses due to consolidation as the government had suggested the merger of smaller banks with bigger in order to make public sector banks more competitive. Although, smaller banks were not ready for the same “There was a threat of amalgamation of banks till last year and smaller banks were in a rush to increase their balance sheet size,” said an executive of a public sector bank.

For the meantime the consolidation plan has been put on hold. It is believed RBI’s change of rule will help them in increasing their balance sheet size. Also, the cost of maintaining rural branches are low therefore banks are free to open branches in rural areas in the vicinity of bigger towns or in an industrial cluster, making it a profitable proposition.

Allahabad Bank is mainly located in eastern India bank, is planning to do aggressive branch expansion in southern and western states. “In some areas, RBI guidelines on opening branches might help, and we will be looking at opportunities in such areas,” said Executive Director D Sarkar. The bank has obtained license for 69 branches, much higher than in the preceding years.

On the other hand Bank of Maharashtra, mainly focused in western India has planned aggressive branch expansion. It has planned to open 75 new branches this year, against 45 last year. Its main focus will in eastern states. “We are now aggressive in expanding branch network to make the bank fairly representative. We are trying to broadbase our customer base to include states in the northeast, Bihar and Jharkhand,” said Executive Director MG Sanghvi.

Last year, in December RBI has also allowed banks to open branches in urban centers of Sikkin and the northeast without prior permission. “In the last one year, more branches have come up, but the definite impact of RBI’s policy will show up this year,” said United Bank of India’s Executive Director SL Bansal.

Monday, May 24, 2010

Banks told to speedily address ATM-related complaints

The Reserve Bank of India will be formulating common code for all banks. Therefore banks will have to speedily solve ATM-related complaints. Under this, the banks will have to issue a ticket number within a day of the complaint received and will have to resolve the issue within a week of the filing of the complaint.

The central bank has directed the banking association IBA to draft a common code for ATM related complaints.

An IBA official informed, “The new format is for facilitating the uniform filing of complaints by the customers. Besides, it will also help to a keep a tab on bank’s complaints-resolving capability.”

Banks have also been asked to display the ATM identification number and contact centre number specifically for ATM related issues. The official said, “Banks will soon have to put the information on their websites, where a customer will be able to track his resolution progress.”

While explaining the process, the official said when a customer files a complaint the bank’s branch will have to ensure that it is updated in the complaint management system (CMS) immediately. The official added, “On uploading the details, the issue will be escalated to the current branch, which needs to be resolved within seven working days.”

Under this new system customers will also get the facility to file e-complaints once the banks upload the formats on their website. The official told, “One can use the ATM identification number and file the complaint online.”

The banks appoint officials known as ATM in-charge, who monitor offsite ATMs. Then the concerned official every morning files a report giving details of cash level, down time and the amount withdrawn from each ATM.

According to data provided by finance ministry, in the last three years public sector banks have opened around 30,000 ATMs. Out of this State Bank of India, country’s largest lender opened 13,000 ATMs during this period.

According to some of the banks, by setting the deadline the process will not speed up but might hamper in pledging the process effectively. An executive director of a north-based public sector bank said, “Complaints can be of various types. Some of them may take more than a week.”

Friday, May 21, 2010

Govt. asks RBI to decide ‘Indian-ness’ of private sector banks

The ‘Indian-ness’ of the country’s leading private sector banks will be decided by the Reserve bank of India (RBI). Based on the RBI's decision, the Indian government will figure out a solution for them without relaxing the provisions of the new foreign direct investment policy.

From over a year government has been having discussion on this issue and finally it has asked the apex bank to draft a framework for deciding the ownership and control of such banks.

According to a senior government official the new norms will be drafted on the parameters such as voting rights and the power to appoint directors of the banks.

He said, “We need to recognize that the structure of each bank is different and accordingly redefine the concept of ownership and control for the banking sector.”

However seven private sector lenders will get official pardon from this move of government. The seven private lenders which have been branded as foreign banks under the current norms include- ICICI Bank, HDFC Bank, ING Vysya, Development Credit Bank, Federal Bank, IndusInd Bank and YES Bank.

This issue has been pending for long with its roots in Press Note 2 of 2009, finally it was taken up for discussion at a recent meeting of the finance ministry, departmental of industrial policy and promotion and the RBI.

In Press Note 2 a structure for calculation of total foreign investment in Indian companies is given, which is based on ownership and control of such firms. According to this all types of overseas ownership will be counted as foreign investment.

It also states that any company who owns over 50% overseas investment will be considered foreign owned. As per its definition control is the power to appoint majority of directors on the board of a company.

Most important is that all the downstream investments by a foreign-owned company will be considered as foreign investment and be subject to sectoral caps and restrictions. When these norms were circulated to the banks, the banks took up the issue with the RBI and had sought clarifications on their exact status and investments.

However RBI had also written to the finance ministry and pointed out that ownership and control may not be limited to just equity holding and power to appoint directors.

Although analysts have welcomed the move but have to be done carefully. “There is no straight jacketed approach. The formula would have to be based after a careful review of the interplay of voting rights and economic ownership of banks,” said Nimai Vijay, associate director, PricewaterhouseCoopers.

Thursday, May 13, 2010

Cyber mafia create phishing sites of bank, RBI and govt. departments

Internet security giant Symantec recently conducted a survey in which it reported that cyber mafia have changed their techniques of gathering information from bank customers. Now these mafias are launching phishing websites in the names of leading banks and financial institutions in India. In the month of March alone there has been a 35% increase in the number of phishing attacks on Indian internet users.

It reported the cyber mafias are based in the US and some European and African countries are on the prowl. So people should be careful when receive an email asking to update personal confidential data online. People should double check from bank or income tax department before giving out the information to these cyber mafias.

They are camouflaged on the internet, using names of various banks, including the Reserve Bank of India (RBI), and government departments. They are targeting banking information and personal financial details of people which they might later misuse it.

In the report Symantec has mentioned about phising website which was created in March by cyber criminals in the name of the RBI. The webpage of this phising website is different from the original RBI web portal, if the recipients are not careful they can get into cyber mafia trap. The cyber mafias are using a single web page to pass themselves as various banks and government agencies and are just changing logos and some key words to on the template to change identities. With close scrutiny you can easily identify fakes.

The phishing mail also have URL link. Clicking on the link, the target user will reach a website bearing the name of a bank or a government department. The mail requests the user to enter personal information, such as bank account number and password.

Most of the phishing websites created in March have URL extensions ending with .in, which actually indicates that they are Indian websites. On careful scrutiny it was found that the servers of these websites are located in the US.

According to a senior IT professional working with an internet firm, “The information provided by unsuspecting users could be used to siphon off money from their bank accounts. Their personal information might be used by cyber criminals to create fake registrations, fake ids and other illegal purposes.”

Tuesday, May 11, 2010

RBI revised cash limit for foreign travel

The Reserve Bank of India (RBI) has revised forex rules. Now travelers going abroad can take up to USD 3,000 or its equivalent amount in other currencies from Forex dealers and don’t need to take prior permission from RBI. The revised rules will be applicable with immediate effect, according to RBI notification.

But the revised ceiling will not be applicable to persons going to certain specified countries like Iraq, Libya, Iran, Russia and the Commonwealth of Independent States (CIS) countries. The notification further said the travelers going to Libya or Iraq will continue to get up to USD 5,000 or its equivalent in other currencies and no changes have been made in the provisions for travelers to Iran, Russia and CIS countries. Also forex dealers and money exchangers have been given permission to sell foreign exchange in other currencies other than American Dollar up to USD 3,000.

Wednesday, May 5, 2010

RBI issues new pricing rules for share transfers to NRIs

The Reserve Bank of India has issued new pricing rules for shares being issued or transferred to overseas Indians under the foreign direct investment policy.

According to new rules the price at which the shares are issued or transferred has to be the same as the price as per SEBI guidelines for the allotment, the RBI said in the guidelines put on its website.

Earlier, the minimum price was the same as the existing market price or that worked out by a licensed chartered accountant, the bank said.

If the overseas Indians are transferring shares to local residents the transfer price must not exceed the price at which the overseas Indian got the shares.

RBI asked banks to install extra cover to make mobile and phone banking safe

The Reserve Bank of India have issued instructions to banks to make mobile and phone banking safe to avoid identity frauds in non branch banking services.

To provide safety banks will have to install an extra cover guaranteeing the legitimacy of the customer carrying out the debit or credit card transaction through the phone. The RBI has strictly warned the banks that if they failed to do so they will have to pay penalty.

The RBI said that banks will have to complete this process by next year in which the debit and credit card customers will given an extra password for IVR (Interactive Voice Response) transactions.

Thus after the new security measure the customer will have to dial another extra password to verify the transaction other than the information which he had previously used for the transaction.

This measure has been taken to stop the increasing number of frauds using non branch methods. Earlier, from April 2009, RBI had instructed the banks to give an extra verification system based on the details not given on the cards, in case the card was not physically present.

However it is planning to extend this measure to include IVR transactions.

The security codes provided for security measures will vary from those seen on the cards.

The banks will also introduce system of ‘Online Alerts’ to the cardholder for the transactions where ‘card is not present’ worth Rs. 5000 and more.

RBI asked banks to install extra cover to make mobile and phone banking safe

The Reserve Bank of India have issued instructions to banks to make mobile and phone banking safe to avoid identity frauds in non branch banking services.

To provide safety banks will have to install an extra cover guaranteeing the legitimacy of the customer carrying out the debit or credit card transaction through the phone. The RBI has strictly warned the banks that if they failed to do so they will have to pay penalty.

The RBI said that banks will have to complete this process by next year in which the debit and credit card customers will given an extra password for IVR (Interactive Voice Response) transactions.

Thus after the new security measure the customer will have to dial another extra password to verify the transaction other than the information which he had previously used for the transaction.

This measure has been taken to stop the increasing number of frauds using non branch methods. Earlier, from April 2009, RBI had instructed the banks to give an extra verification system based on the details not given on the cards, in case the card was not physically present.

However it is planning to extend this measure to include IVR transactions.

The security codes provided for security measures will vary from those seen on the cards.

The banks will also introduce system of ‘Online Alerts’ to the cardholder for the transactions where ‘card is not present’ worth Rs. 5000 and more.

RRB customers to get online facility & biometric ATM cards for banking transaction

Almost all the nationalized commercial banks offer on-line transaction facilities, working on the same line, Rushikulya Gramya Bank (RGB) in Orissa will soon offer on-line transaction facilities and issue smart and biometric ATM cards to its customers.

The bank will update its technology in association with its sponsor Andhra Bank. First the bank will implement Core Banking Solution (CBS) in all its 81 branches located in southern Orissa’s Ganjam and Gajapati districts.

The bank plans to bring all its branches under CBS by March 2011 as against the last date of September 2011 set by the central government.

The Centre has also instructed all the RRBs (regional rural banks) across the country that by the end of September next year they should implement CBS facilities in all their branches with the help of their respective sponsor banks.

Chairman of the bank P V S T R Seshagiri Rao said, "We have already prepared the roadmaps for the CBS in support of our sponsoring bank Andhra Bank."

Most probably in July the first branch having CBS facility will start operations and by the end of September around 50 per cent of the branches will be covered under CBS. He said by the end of the current fiscal all branches are likely to be covered under CBS.

He said, "We will tie up with Andhra Bank to use the ATMs of the sponsoring bank by the customers of RGB after implementation of the CBS. Any customer of RGB will operate their transaction through ATMs of Andhra Bank anywhere in the country like any other commercial banks."

Tuesday, March 30, 2010

RBI to issue polymer notes of Rs 10 denomination in five cities

Soon you will see polymer notes of Rs 10 denomination in the market. The Reserve Bank of India will be issuing 100-crore polymer notes of Rs 10 denomination to improve their longevity and to thwart counterfeiters.

While speaking at the Foundation Stone laying function for the Bank Note Paper Mill at Mysore RBI governor D Subbarao told that in the beginning RBI will be introducing these notes in five cities. Globally, currency authorities of many advanced economies such as Canada and Australia have already introduced the polymer currencies.

The governor said polymer notes are more environment friendly. He added, “Considering the relatively long life of polymer notes and their amenability to re-cycling, the ‘carbon footprint’ of polymer notes vis-à-vis paper banknotes is likely to be on the plus side. Regardless, this is one of the issues that we will study during the pilot phase, and will embark on polymer notes on a long-term basis only if the cost-benefit calculus is decidedly positive in all dimensions.”

This year India will be printing around 17 billion pieces of paper currency. He said, “Producing our own paper is decidedly cheaper, and a check against counterfeiting.” In international terms India’s demand for banknote paper — 18000 MT per year is quite huge, and there are just 3/4 large producers. Mr Subbarao said, “This situation exposes us to vulnerabilities of a suppliers market in terms of price, quantity and timelines, something that we should avoid or minimize.” He added the major countries like the US, Japan, China, Brazil, Russia and countries in the euro area and even smaller countries like South Korea, Indonesia, Iran and Pakistan make their own bank note paper.

Expressing his views on the trend in counterfeiting he said, “By an international metric, the incidence of counterfeit notes in India is not alarming” and added that counterfeiting per se is a matter of serious concern for the government and RBI.

As per the figures, Australia detected seven pieces of counterfeit notes per million notes in circulation (2008-09), in Canada it was 76 (2008). In New Zealand, there are 0.71 counterfeits per million notes in circulation (2008-09), whereas in Switzerland it was 10. As for the euro, there was roughly about one counterfeit per 14,600 bank notes in circulation (2008).

Whereas in India, in 2008-09 fake notes detected by banks and fake notes found in remittances received by RBI amounted to eight for every one million notes in circulation. Mr Subbarao clarified this data does not include the counterfeits that were seized by the police.

Wednesday, March 10, 2010

RBI panel proposes double the guarantee provided under a govt scheme

The Reserve Bank of India panel has put forward a proposal to double the guarantee provided under a government scheme. This will enable the small businessmen to get collateral-free loans for up to Rs 10 lakh from banks.

On Saturday finance Minister Pranab Mukherjee released RBI report in which it has proposed that banks should not insist for collateral or guarantees from small businesses for loans up to Rs 10 lakh. Report stated for such loans the security will be provided under a guarantee by Credit Guarantee Fund Trust for medium and small enterprises (CGTSME).

The report also suggested for reducing guarantee fees for women entrepreneurs and for enterprises in the North-East. In April’09 RBI in its monetary policy had set up a working group to review the Credit Guarantee Scheme of the Credit Guarantee Fund Trust. While launching the report the finance minister said, “This constitutes an important initiative by government for MSMEs to avail bank credit without the hassle of collateral or third-party guarantee.”

RBI report has been launched seven months after RBI had instructed banks that they cannot ask for collateral security for loans up to Rs 5 lakh given to micro and small enterprises in manufacturing and service sector.

After the meeting with Sebi, on Saturday, the finance minister held discussion with the members of the board of RBI. Mr Mukherjee said, “Various aspects of budget proposal were analysed and board members gave their comments and inputs about budgetary proposals”.

Later on the finance minister said the government will be taking up the consolidation among the public sector banks in consultation with RBI if the banks themselves contacted with the proposals.

The finance minister said, “So far the regional rural banks have come forth and consolidation among RRBs have taken place. I have also made proposal that there should be licenses for new banks and of course they should meet the criteria fixed by the RBI”.

Regarding the food inflation the finance minister said there has been a trade off between the increase in the prices of cereals and food security. Indicating towards the current inflation the finance minister said it is not because of monetary expansion, the price rise in wholesale basket is largely due to food items.

He added, “Cereals are not un-available but cereal prices increased because procurement price have been benchmarked at a high level. If you procure one quintal of wheat at Rs 1,100 and your total procurement is 34% of total production, naturally the retail benchmark cannot be less than Rs 13-14 per kg. Similarly, if you procure one quintal of paddy at Rs 1,050 after conversion charges, mandi charges, and other taxes rice at retail level cannot be more than Rs 19.45”.

The minister said, “There is a cost push ingredient in the high prices of these cereals. But it was inevitable if farmers do not get remunerative prices they will not produce enough. because of these prices farmers are producing enough there is no shortage of food stock”.

Giving a reply of a question on the pace of fiscal consolidation the finance minister said, “Fiscal consolidation does not contradict growth. Without fiscal consolidation growth will not be sustainable. One of the reasons we could with stand the pressure of the international financial crisis was because of our fiscal consolidation and adherence to FRBM which also achieved for three years high growth performance at the rate of 9%”.

RBI to issue new Rs 20 note with change in inset letter

In few months if you get a new Rs 20 note do not get worried thinking it as forged note. The Reserve Bank of India (RBI) will shortly issue Rs 20 denomination banknotes with a change in inset letter. In new Rs 20 notes RBI is making changes in inset letter in both numbering panels in Mahatma Gandhi Series – 2005 bearing the signature of Dr D Subbarao, Governor.

The rest of the design of these notes to be issued now will be same in all respects to the banknotes in Mahatma Gandhi Series – 2005, with additional/new security features issued on August 16, 2006. RBI sources said, all the old Rs 20 banknotes issued by the RBI will continue to be legal tender.

Friday, February 26, 2010

RBI issued guidelines enhanced security features & standardized fields for cheques

The Reserve Bank of India (RBI) has issued guidelines enhancing security features and standardized fields for bank cheques in order to help straight-through-processing using optical technology.

The central bank informed that soon it will be rolling out timetable for revised benchmark prescriptions, or Cheque Truncation System (CTS)-2010 standard. The Indian Bank’s Association (IBA) and National Payments Corporation of India (NPCI) will organize and advice banks on these additional security features.

The new guidelines include use of quality paper, watermark and printing of bank logos in invisible ink, standard size, clutter-free background, and use of ultra violet images. RBI said, “Homogeneity of security features is expected to act as a deterrent against cheque frauds.”

The central bank maintaining status quo on existing paper specification, said paper quality should be image-friendly and have protection against alterations by having chemical sensitivity to acids, alkalis, bleaches and solvents, giving a visible result after a fraudulent attack. When put under ultraviolet (UV) light the paper should not glow so that the feel of cheques is uniform across banks.

Regarding the use of watermark, it said that at the time of manufacturing, cheques must have a standardized watermark with the words “CTS-INDIA” which should be visible when held against any light source. Due to this photocopy or printing of cheque will become difficult, as the paper will be available only to printers. The watermark must be oval in shape and the diameter can be 2.6-3 cm. Each cheque must have at least one full watermark.

Bank’s logos on cheques must be printed in UV ink. The logos will be captured by and visible under UV-enabled scanners and lamps.

RBI takes class action against foreign banks & PSU for faulty rate calculation

The Reserve Bank of India (RBI) in 2008-09 banking ombudsman annual report said it has started taking class action against the banks whose decisions are not favorable to the interests of their customers.

Some of the foreign bank and public sector bank method of calculating interest rate on deposits and housing loans have not been in their customers’ interest therefore RBI is taking class action against such banks.

As per the report, one more PSU bank was asked to re-credit insurance premium that was debited on savings account holders without their consensus under a group insurance scheme.

Under a class action general direction is issued in cases that can benefit not only the applicant but also all customers who have been affected.

The RBI has appointed banking ombudsmen for different regions in the country to deal with customer complaints against banks after the lenders are not able to provide suitable solutions to the customers. Thus banking ombudsmen has received the complaints and based on these complaints RBI had filed class action suits against three banks – one foreign and two public sector banks.

Although in the report banks name were not mentioned stated, “The lawsuit against the foreign bank is regarding the mode of calculation of interest rates on deposit accounts. A PSU bank was advised to recalculate interest rate on all housing loans as per terms of the agreements entered into with all the borrowers without their application for relief.”

According to report, in 2008-09 the number of complaints against foreign banks has risen by 91% from a year ago which shows that Indian customers are most dissatisfied with the foreign banks carrying out operations in India. The total number of complaints registered by 18 ombudsmen across the country stands to 11,700, out of which 2,838 complaints were against HSBC. Next to it stands the Citibank with 2,563 complaints, followed by Standard Chartered, Barclays and ABN AMRO having large number of customer complaints.