RBI to roll out plastic currency on pilot basis

In order to stop damaged currency from further circulation, the Reserve Bank of India has instructed all the bank branches to install note-sorting machine. The step will discourage the further circulation of the unfit currency.

Governor of Central Bank Mr. D Subbarao said "The Reserve Bank is committed to a 'clean note' policy. RBI exchanges soiled notes for clean ones, and mutilated notes for new ones subject to certain conditions."

He also said "In pursuit of our clean note policy and to check counterfeiting, we also prescribed that by March 31, 2011, all bank branches with cash receipts of over Rs 50 lakhs per day be equipped with a note sorting machine so that every high denomination currency note is checked for fitness and genuineness before being put back in circulation."

Speaking about the plastic currency, he said that at first they are planning to launch it on pilot basis. Initially the bank will issue plastic notes in the Rs. 10 denominations. During this phase bank will monitor various factors including the cost and the disposal of the plastic currency. The further implementation will depend on the outcome.

Plastic currency is already in use in countries like Australia and Singapore.

RBI levied The Janata Co-op Bank Ltd, Godhara branch

The Reserve Bank of India has levied the Godhara branch of The Janata Co-op Bank Ltd in Panchmahal District with Rs one lac. The bank was charged in violation of the norms laid by Reserve Bank of India on persistence of irregularities of previous inspection report and requirement of reporting of cash transactions in excess of 10.00 lakh to FIU-IND, as required under AML guidelines.

The Central Bank issued a show cause notice to the bank to which the bank gave a written reply. RBI then discussed the case and levied the bank with a penalty of Rs one lac.

RBI not happy with prepayment penalty from banks

The Reserve Bank of India recently expressed discontent on the practice of the bank of imposing high prepayment penalty on housing loans. In some cases borrowers are levied with prepayment penalty as high as 5 percent. RBI is not at all happy from the banks following such practices.

A senior RBI official said "RBI is clearly not happy with high prepayment charges. But should the regulator put a ban on prepayment charges is still a matter of further discussion.”

However the banks strongly advocate the practice of prepayment penalty as they say that such an act creates gaps in their asset-liability management. The largest lender of the country State Bank of India does not levy any charge on it’s customers on the prepayment of home loan.

Banks starts reacting to rate hike by RBI

Reacting to the hike made by the Reserve Bank of India in the policy rates, several banks including Punjab National Bank announced an increment in the deposit and lending rates by up to 100 basis points.

PNB raised BPLR from 12.50 to 13.00 percent while Allahabad Bank revised BPLR from 13.25 to 13.50 percent, Punjab and Sind Bank raise the BPLR by 25 basis points to 14.25 percent.

The three banks also raised their base rates by 50 points. The banks also revised the deposit rates across various maturities and also introduced new deposit schemes.

In a statement Punjab National Bank said "in response to changing liquidity conditions in the system, inflation, other macroeconomic factors and monetary measures undertaken by the Reserve Bank".

The new rates are in effect from today itself.