Increasing interest rates to hamper bank profitability

According to The Reserve Bank of India, the profitability of the banks is likely to suffer mainly because of the increase in the interest rate and high cost of funds.

In the Financial Stability Report, RBI said “Going ahead, with hardening interest rates and the imminent increase in cost of funds, the credit growth is expected to slow down, which could adversely affect the profitability.”

The profits of public sector banks were lower than those to the private sector banks mainly because of the hike in the saving account rates and due to the pension liabilities.

Mahesh Bank now a member of NEFT system

Now the customer of AP Mahesh Co-Operative Bank would also be able to transfer funds online as the bank has been admitted as a member of the National Electronic Funds Transfer (NEFT) system.

Chairman of the Bank, Mr. Ramesh Bung said “This will enable customers to transfer their funds, even small amounts across India instantaneously.”

Apart from that the banks has also got permission form Reserve Bank of India to three more branches. The total branch count of the bank will increase to 36 if the new branches that have been granted permission are also considered.

“Leaves”, to spot the culprit

As a precautionary move to check the menace of frauds in banks, the Reserve Bank of India has suggested implementation of mandatory leave. Such a move will allow the bank t keep a track of the work by an officer.

In most of the fraud cases, it was found that the culprits were very regular, due to which they were aware of each and every development that allowed them to tackle the situations more effectively. The practice is already in place in many multinational as well as private sector banks, it forms an integral part of their risk management policy.

The Chairman of the Indian Banks Associatio, Mr. M D Mallya said "We already have a mandatory leave policy for those in sensitive positions such as treasury and forex. But in the context of present developments there may be need for review."

RBI mandates a vigilance system for private and foreign banks

In order to check the malpractices and frauds, Reserve bank of India has asked the private and foreign bank to follow the footprints of public sector banks and to appoint the chief of Internal Vigilance (CIV) by August.

In a notification the Central Bank said "In an Endeavour to align the vigilance function in private sector and foreign banks to that of the public sector banks the existing vigilance functions of a few private sector and foreign banks were mapped with the existing guidelines in the matter and it was observed that the practices vary widely among the banks."

The notification also stated "It has therefore been decided to lay down detailed guidelines for private sector and foreign banks on similar lines so that all issues arising out of lapses in the functioning of the private sector and foreign banks especially relating to corruption, malpractices, frauds etc can be addressed uniformly by the banks for timely and appropriate action."

Such a system is expected to br.ing transparency in the functioning of the banks. A CIV will be required to fulfill certain requirements and the tenure for the same will be of 3 years that can be extended to another 2 years.

Banks should focus on recruitment process: RBI dy.governor

The Deputy Governor of Reserve Bank of India, Mr. K C Chakrabarty has expressed his discontent on the practice of hiring B-school graduates by the banks; he believes that because of this the suitable candidates are not getting the chance that they are entitled of.

He insisted on recruiting the candidates through competitive exams, so that every candidate has equal chance. He also criticized the practice of online job application by the banks as internet facilities are still at dearth and every one does not have access to it.

He further said “When financial Inclusion is the major concern of Indian banking, don’t we need people who would be closer to the ground realities of the countryside? How .many of these people recruited through B-schools will have empathy towards the poorest of the poor? Why should we be rushing to the B-school campuses for recruitments?”