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.”
Monday, August 16, 2010
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.
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.
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."
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."
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