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.