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.