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.