RBI settles with 0.25 percent interest hike

The Reserve Bank of India announced a raise in the lending borrowing rates by 25 basis points applicable with immediate effect. Now the Repo Rate is fixed at 6.5 percent and the Reverse Repo Rate at 5.5 percent.

The Governor of Central Bank Mr D Subbarao said "Indeed we did (consider 50 basis point hike)...Its not as if it was straight-forward decision that fell out of some analytical model."

He also said , "Dilemma before Reserve Bank mainly was how to balance between concern of growth and concerns of inflation...Our challenge is to restrain demand pressures in the short term, and support supply response. So, with one monetary policy instrument how do we restrain demand and support supply, that has been the challenge."

RBI is desperately trying to curb out the inflation problem from the Indian market and it is yet another step from the Central Bank in the same direction.

RBI urges banks to keep an eye on utilization of loans

The Reserve Bank of India has outlined certain flaws in keeping a follow up of the lent money to the borrowers by some banks. The Central Bank said that some banks are not keeping a proper follow up of where the lent money is being utilized.

According to the central bank some of the banks blindly follow the Chartered Accountants reports and do not keep proper check of the work on their own.

The Central Bank said "In the context of the above, it is advised that the efficacy of the existing machinery in your bank for post-sanction supervision and follow-up of advances may please be evaluated and made robust, wherever considered necessary,"

The improper utilization of the lent money adds to the bad debt of the bank and thus deteriorates the performance of the bank. The Central Bank urged the banks to discontinue such practices and to keep a proper record of books of the account of the borrower.

RBI sets new deadline to implement OTP

The RBI has spared banks for one month more to implement the one-time user password for credit card transactions over phone. Earlier this technology has to come into effect from January 1, 2011, but now RBI has now postponed the deadline to February 1 this year .

After this system comes into effect the customers would require an additional password for telephonic credit card payment. The bank would decline the transaction if the customer would not provide one-time password (OTP) after February 1 .

The system has to come into effect from January 1, but some banks expressed their inability to complete the installation process by the due date . So after consulting the officials , RBI gave extra time of one month to the banks to comply the guidelines.

The new system will check credit card frauds, as lost credit cards could be used by anyone and was an area of deep concern for the banks . Earlier the banks made it mandatory to provide an identification proof and matching of signatures for every transaction in which credit card was to be used physically, but phone and internet banking were a lot more areas of concern in term of misuse.

The proposed OTP will be valid for a single use and would remain in effect for a period of 2 hours. The customers would need to generate a separate OTP for each IVR transaction. The password will be sent only to the registered mobile number and email address of the customer.

HDFC bank said in a circular "The date of implementation (of additional password) has been revised to February 1, 2011, as advised by RBI,"