RBI directs RRBs and Cooperative Banks to revamp their savings bank accounts

The banking regulator RBI last week asked all the cooperative banks and regional rural banks (RRB) to waive off the minimum balance requirement on all their savings account and in-effect convert them to 'basic saving accounts'.

"The existing basic banking 'no-frills' accounts should be converted to Basic Savings Bank Deposit Account," read the RBI notifications to the banks. It further added that a single customer can only have one such account and will have to close any savings bank account within a month.

Basic savings account would come with services like deposit and withdrawal of cash at branch and ATM and also credit of money through e-payment modes. The account would be entitled to a maximum of four withdrawals per month including ATM transactions.

RBI had introduced 'no-frills' savings accounts in 2005 to promote financial inclusion and provide banking services to the poor and financially excluded. Such accounts were slated to be maintained with very low or zero minimum balance.

RBI website to make people aware of counterfiet currency

No one understands the problem of fake currency unless they themselves face the unfortunate instance of getting a fake currency note in their hands. RBI website: www.paisaboltahai.rbi.org.in is the regulator's attempt to  educate people how to detect fake currency notes.

The website provides visual aids with information on genuine currency notes of all denominations ranging from Rs. 10 to Rs. 1,000. The website has a tagline "Pehchano Paise Ki Boli, Kyunki Paisa Bolta Hai".

Users can downloand the posters from the website and use it for reference at later point of time. The website also has a video giving information on fake currency notes, which too can be downloaded.

There is also an information on number of fake currency notes in circulation and detected. As on March 31,2011 there were 64,577 million bank notes in circulation, out of which 6.74 notes per million were fake.

According to the RBI governor D. Subbarao, tackling fake notes is a high priority for the regulator and police and RBI are taking strict measures to deal with the problem. Educating the people to differentiate between fake and genuine is important he further added.

RBI points out loopholes in governance of Laxmi Vilas Bank; asked to work on it

The Laxmi Vilas Bank has been directed by the RBI to fill in the loopholes in its corporate governance and business practices. The regulator had earlier pointed out the fallacies in the way the bank monitors its accounts and also that the promoters were increasing their shareholding in the bank, which was against the regulator's guidelines.

RBI report pointed out that bank was not adhering to know your customers (KYC) and anti-money laundering (AML) guidelines which can result in high exposure to operational risk, and asked the banks to resolve the issue by earlieast possible.

The regulator further added that out of 1,814 accounts classified as sub standard on March 30,2010 remained as such after one year of being recognized. RBI also pointed out that bank had a poor asset liability management, as it had not classified 171 loan accounts which were non-operational for three years as nonperforming assets (NPA).

In addition to it the promoter's holding in the bank rose to 11.47% against RBI's guidelines which allow a maximum of 10%.  RBI also added that the bank leased one of the premises to one of the director without following the proper procedure.

RBI and Government lock horns on HFC refinancing by banks

In what could be a letdown for refinance of housing finance companies by banks, the central bank has reversed its own directives by removing indirect priority sector lending clause for refinancing of housing finance companies' HFC debts by banks. The RBI has also reduced the ceiling for refinance.

The finance ministry had earlier provided some respite for specialized home loan companies by allowing banks to consider their refinancing of HFC as priority lending, and increasing the ceiling from Rs. 5 lakh to Rs. 10 lakh per home. This was done to promote affordable housing and increase lending to low income group.

But the RBI has tightened the norms for banks lending to finance companies, and keeping HFC refinancing out of priority lending regime.

Smaller HFCs get refinancing from banks at 10-11% per year. 

Notification issued to three cooperative banks

RBI recently, issued guidelines to three cooperative banks. The three district central co-operative banks, namely, Osmanabad District Central Co-operative bank, Jalna District Co-operative bank & Dhule and Nandurbar District co-operative bank have been asked not to open new deposits accounts for some time due to certain reasons, however the renewal of the existing accounts are allowed for the same capacity.

“The directions issued to the above mentioned district central co-operative banks stipulate that they shall not accept fresh deposits including saving bank account, current accounts, fixed deposit accounts, recurring deposit accounts and/or any other deposit by whatever name called,” RBI said in a notification.

RBI can change the instructions in the near future depending on the circumstances but this step should not be misunderstood as the cancellation of license of any bank or any negative influence on the image of banks.

Life of cheques and drafts reduced by 3 months

The Reserve Bank of India has issued new set of guidelines in context of usage of cheques and bank drafts. The apex bank has shortened the validity period for these instruments from present 6 months to 3 months.

The unfair usage of these instruments by circulating it like cash which was brought into the consideration of Government prompted the Reserve Bank to make amendments. RBI has also asked the banks to make it sure that the account payee cheques and drafts are credited to the account of the person for which they are meant.

The development will be effective from April 1 and to make the bank customers aware of it the Reserve Bank of India has asked the lenders to print the change on the cheques and the drafts issued from 1^st April onwards.

RBI might take stringent actions against teaser loans

The Reserve Bank of India has always been concerned about the teaser home loan schemes offered by the lenders where the interest rate remains fixed for first few years and then it goes floating. The largest lender in the country State Bank of India used to offer such a loan scheme but it was withdrawn when RBI pressurized it to do so.

The major concern of RBI is the rise in the defaults in repayment once the interest rate shifts to floating interest rate scheme. Aware about the criticism from the umbrella banking body, the largest private sector bank in the country launched two home loan schemes that with both fixed and floating interest rate elements.

There is no such ban on teaser loan schemes but concerned about the side-effects of such schemes, the Governor of RBI has alluded that actions may be taken against tease loan schemes, is they continue to be a matter of concern.