The Reserve Bank of India (RBI) today announced a hike in its short-term lending rate to banks by 0.25 per cent to 8 per cent in the face of rising inflation. Due to hike in repo rate consumer, home, auto and other loans can become costlier.
The central bank said the decision of increasing short-term lending rates from 7.75 per cent to 8 per cent was taken to control inflationary expectations as the rate of rise in prices touched a 45- month high of 8.24 per cent.
Analysts are a view of the inflation, is expected to move up over nine per cent once hike in petroleum prices gets reflected in the official wholesale price index.
In this fiscal the decision to increase repo rate, at which the central bank gives short term money to banks in exchange of government securities, has been taken for first time.
Earlier RBI had tried to control inflation by raising cash reserve ratio-- the mandatory deposits that banks keep with RBI.
Commenting on RBI decision Punjab National Bank Chairman K C Chakrabarty said, "All interest rates would be affected. We will take decision by month end. It (the move) will increase the cost of resources."
Country's largest lender SBI sources said in view of increase in the repo rates by RBI, it will be examining lending and deposit rates on Friday.
Real Estate Company Unitech said home loan rates might rise after the Reserve Bank's step.
However the reverse repo rate, at which RBI borrows money from banks in exchange of the government papers, remained untouched at six per cent.
HDFC Bank Chief Economist Abheek Barua said," This (repo rate hike) will have an implication on the bank's lending rates. I think the Prime Lending Rates of the banks will go up by about 50 basis points. There would also be a revision of bank's deposit rates."
Thursday, June 12, 2008
Thursday, June 5, 2008
RBI puts ban on Sahara India from accepting deposits
Sahara India Financial Corporation (SIFCL) having political connections and closeness with Bollywood stars has been banned by The Reserve Bank of India (RBI) from raising money through public deposits. RBI said ban is from immediate effect. RBI has put ban because the residuary non-banking finance company (NBFC) has "continuously violated" the requisite directions and guidelines.
In a statement released by the apex bank said the violations were related to maintenance of directed investments, payment of minimum interest rate, asset-liability management guidelines and know-your-customer (KYC) norms stipulated for opening of deposit accounts and the details on the agents of the company deployed for deposit mobilization.
The statement stated violation pertained to intimating depositors in time of maturity of their deposits and repayment of deposits on maturity. Ban will mean that company won’t be able to accept fresh deposits, nor renew deposits it has raised from 42.5 million depositors.
Residuary NBFCs used to accept public deposits in the form of daily deposits, recurring deposits and fixed deposits. The segment also included NBFCs which could not be classified as equipment leasing, hire purchase, loan, investment, nidhi or chit fund companies, but accessed public savings by operating recurring deposit-type schemes.
RBI in April 2007 had cancelled this discretionary investment headroom for Sahara. Therefore, Sahara was asked to invest entirely in government securities and other lower-yielding bonds, which reduced its margins. RNBFCs have to give minimum interest rates to depositors, which could be 3.5% for daily deposits and 5% for fixed deposits.
Sahara has made its presence in India and carries out its operations through a mass of agents.
According to the RBI statement, SIFCL shall immediately inform all its agents and employees that it has been prohibited from accepting deposits, and shall paste a copy of the order in a conspicuous place at each of its branches and offices.
RBI further in order to protect the interest of depositors and in public interest instructed Sahara to repay the deposits as and when they mature.
On the other hand SIFCL had issued a strongly-worded statement asking its depositors not to panic. It stated RBI order as “legally unsound” and is “wanting in prudence and application of mind”. In a statement company said it will be initiating legal proceedings very soon, adding it was “sanguine” about its chances of success. It also clarified that the depositors would be paid as and when the deposits mature, and other activities like insurance and mutual funds would not be affected by the order.
In a statement released by the apex bank said the violations were related to maintenance of directed investments, payment of minimum interest rate, asset-liability management guidelines and know-your-customer (KYC) norms stipulated for opening of deposit accounts and the details on the agents of the company deployed for deposit mobilization.
The statement stated violation pertained to intimating depositors in time of maturity of their deposits and repayment of deposits on maturity. Ban will mean that company won’t be able to accept fresh deposits, nor renew deposits it has raised from 42.5 million depositors.
Residuary NBFCs used to accept public deposits in the form of daily deposits, recurring deposits and fixed deposits. The segment also included NBFCs which could not be classified as equipment leasing, hire purchase, loan, investment, nidhi or chit fund companies, but accessed public savings by operating recurring deposit-type schemes.
RBI in April 2007 had cancelled this discretionary investment headroom for Sahara. Therefore, Sahara was asked to invest entirely in government securities and other lower-yielding bonds, which reduced its margins. RNBFCs have to give minimum interest rates to depositors, which could be 3.5% for daily deposits and 5% for fixed deposits.
Sahara has made its presence in India and carries out its operations through a mass of agents.
According to the RBI statement, SIFCL shall immediately inform all its agents and employees that it has been prohibited from accepting deposits, and shall paste a copy of the order in a conspicuous place at each of its branches and offices.
RBI further in order to protect the interest of depositors and in public interest instructed Sahara to repay the deposits as and when they mature.
On the other hand SIFCL had issued a strongly-worded statement asking its depositors not to panic. It stated RBI order as “legally unsound” and is “wanting in prudence and application of mind”. In a statement company said it will be initiating legal proceedings very soon, adding it was “sanguine” about its chances of success. It also clarified that the depositors would be paid as and when the deposits mature, and other activities like insurance and mutual funds would not be affected by the order.
Wednesday, June 4, 2008
RBI implements IT-enabled financial inclusion project in Karnataka
The Reserve Bank of India (RBI) is actively implementing IT-enabled financial inclusion project in Karnataka. Under this scheme bank accounts will be opened and smart cards will be issued through these and business correspondents all the government payments will easily be routed to the beneficiaries of public projects like National Rural Employment Guarantee Project (NREGP) in Karnataka.
Devaki Muthukrishnan, regional director, RBI, said a pilot project is being launched to carry out the project in three districts of Bellary, Chitradurga and Gulbarga. "We are in the advanced stages of finalizing the pilot with the lead banks concerned and government of Karnataka. The project will be launched very soon," she said.
Speaking at a one-day workshop on the role and responsibilities of non-government organizations as business facilitators and business correspondents, held in Karnataka, she informed that the first phase of financial inclusion taken up by banking community has successfully completed, during this ‘no frills' accounts were opened for every household in all 29 districts.
In the Bangalore Metro work of opening of accounts has been completed. During the first phase of financial inclusion in the state about 3 million bank accounts were opened.
"The banks need to redesign their business strategies to incorporate specific plans to promote financial inclusion of "bottom of the pyramid" group treating it both as a business opportunity as well as a corporate social responsibility. They have to make use of information technology-based solutions like smart cards extensively to facilitate offsite banking," she said.
Muthukrishnan told banks should use business correspondents and business facilitators' models for increasing the capacities of existing branches to increase their outreach with proper care. They are required to repeat the model of micro-credit delivery to farmers and artisans through NGOs, self help groups and farmers' clubs selectively.
"Financial inclusion can emerge as a commercially profitable business and can lift the financial condition and standards of life of the poor and the disadvantaged. The bankers, technology providers, NGOs, micro-finance institutions have a small but significant role to play in this unfolding of future story of economic growth and distribution and we shall strive to achieve the set goals," she added.
At the workshop organized by Initiatives for Development Foundation, N K Thingalaya, former chairman of Syndicate Bank, Mahpara Ali, Chief General Manager, State Bank of India were also present on the occasion.
Devaki Muthukrishnan, regional director, RBI, said a pilot project is being launched to carry out the project in three districts of Bellary, Chitradurga and Gulbarga. "We are in the advanced stages of finalizing the pilot with the lead banks concerned and government of Karnataka. The project will be launched very soon," she said.
Speaking at a one-day workshop on the role and responsibilities of non-government organizations as business facilitators and business correspondents, held in Karnataka, she informed that the first phase of financial inclusion taken up by banking community has successfully completed, during this ‘no frills' accounts were opened for every household in all 29 districts.
In the Bangalore Metro work of opening of accounts has been completed. During the first phase of financial inclusion in the state about 3 million bank accounts were opened.
"The banks need to redesign their business strategies to incorporate specific plans to promote financial inclusion of "bottom of the pyramid" group treating it both as a business opportunity as well as a corporate social responsibility. They have to make use of information technology-based solutions like smart cards extensively to facilitate offsite banking," she said.
Muthukrishnan told banks should use business correspondents and business facilitators' models for increasing the capacities of existing branches to increase their outreach with proper care. They are required to repeat the model of micro-credit delivery to farmers and artisans through NGOs, self help groups and farmers' clubs selectively.
"Financial inclusion can emerge as a commercially profitable business and can lift the financial condition and standards of life of the poor and the disadvantaged. The bankers, technology providers, NGOs, micro-finance institutions have a small but significant role to play in this unfolding of future story of economic growth and distribution and we shall strive to achieve the set goals," she added.
At the workshop organized by Initiatives for Development Foundation, N K Thingalaya, former chairman of Syndicate Bank, Mahpara Ali, Chief General Manager, State Bank of India were also present on the occasion.
Tuesday, May 27, 2008
Opening bank accounts for small customers still a problem
For the small customers opening bank accounts and carrying out transactions like currency exchange is still a difficult task. Even the Reserve Bank of India expressed discontentment over the issue.
In an annual general meeting of Indian Banks Association’s, RBI Deputy Governor Usha Thorat said still many of the branches are not using a simple form of Know-Your-Customer guidelines for opening accounts. Customers are still finding difficulty to go to a branch for foreign exchange transactions.
Thorat added soon RBI will be issuing further instructions for "operationalising" the farm loan waiver scheme. On rising bad debts in the farm loan sector, she said, "We have data on NPAs in all sectors."
Two – three days back SBI had rolled back ban on new farm equipment financing following pressure from the government and industry bodies. "SBI has clarified the scheme," the RBI deputy governor said at the event.
In an annual general meeting of Indian Banks Association’s, RBI Deputy Governor Usha Thorat said still many of the branches are not using a simple form of Know-Your-Customer guidelines for opening accounts. Customers are still finding difficulty to go to a branch for foreign exchange transactions.
Thorat added soon RBI will be issuing further instructions for "operationalising" the farm loan waiver scheme. On rising bad debts in the farm loan sector, she said, "We have data on NPAs in all sectors."
Two – three days back SBI had rolled back ban on new farm equipment financing following pressure from the government and industry bodies. "SBI has clarified the scheme," the RBI deputy governor said at the event.
Friday, May 16, 2008
RBI ask coop banks to abolish cash withdrawal charges
The Reserve Bank of India on Wednesday issued a notification to the cooperative Banks in which it said the banks will not charge more than Rs 20 for withdrawal of cash by ATM card holders of any banks from their vending machines.
The notification also stated that like other banks, the cooperative banks too will be required to stop taking the cash withdrawal charges from ATMs with effect from April 1, 2009.
Besides cash withdrawal charges for balance enquiry or using any other facility also the cooperative banks have been forbidden from charging any fee with immediate effect.
Earlier the RBI in its notification has already removed all charges from using the ATMs of commercial banks, and the charges on cash withdrawal will be removed with from April 1, 2009.
Therefore this means that from April 1, next year an ATM card holder will be able to withdraw cash from ATM maintained by any bank, including cooperative banks, without payment of any fee.
However, the notification authorized the banks to decide themselves the service charges for withdrawal of cash from ATMs through credit cards and ATMs located abroad.
The notification also stated that like other banks, the cooperative banks too will be required to stop taking the cash withdrawal charges from ATMs with effect from April 1, 2009.
Besides cash withdrawal charges for balance enquiry or using any other facility also the cooperative banks have been forbidden from charging any fee with immediate effect.
Earlier the RBI in its notification has already removed all charges from using the ATMs of commercial banks, and the charges on cash withdrawal will be removed with from April 1, 2009.
Therefore this means that from April 1, next year an ATM card holder will be able to withdraw cash from ATM maintained by any bank, including cooperative banks, without payment of any fee.
However, the notification authorized the banks to decide themselves the service charges for withdrawal of cash from ATMs through credit cards and ATMs located abroad.
Wednesday, May 14, 2008
RBI working group supports no-frills accounts for farmers
The Radhakrishna experts group, in its report, had made wide-ranging recommendations to tackle the issue of agricultural indebtedness. The recommendations included immediate credit-related measures, reforms in financial and institutional architecture, risk mitigation measures, among others.
After the submission of the report the RBI’s internal working group was set up under the chairmanship of Mr V.S. Das, executive director of the RBI, to study the recommendations made by Radhakrishna experts group, has supported the committee’s suggestion to banks that they should open "no-frills" accounts in the name of small farmers to lend minor amounts as well as term loans.
The RBI internal group’s suggestion has come soon after the UPA government in the Budget announced a Rs 60,000-crore loan waiver package to debt-ridden farmers. However the experts group had included in its suggestions such a loan waiver package.
Professing for financial inclusion, the Radhakrishna experts group in its report has pragmatic that institutional credit should be extended to those excluded farmer households who do not have access to any source of credit. This should involve all institutions — scheduled commercial banks, regional rural banks and cooperatives and through them, agencies like business facilitators and business correspondents.
According to the experts group and agreed to by the RBI study, the first phase of this program, should focus on universal establishment of "no-frills" bank accounts.
In many cases, bank accounts should be accompanied by a small overdraft low-value general purpose credit card for small amount for first time entrants in banking system. Insurance policies are also part of the program in some districts.
"Routing of all payments to such households through the bank accounts, especially National Rural Employment Guarantee Scheme (NREGS), pension payments and other relief and social security payments will go further in capturing all cash flows in such bank accounts and encourage larger extension of credit to poor rural households," the RBI working group report said.
After the submission of the report the RBI’s internal working group was set up under the chairmanship of Mr V.S. Das, executive director of the RBI, to study the recommendations made by Radhakrishna experts group, has supported the committee’s suggestion to banks that they should open "no-frills" accounts in the name of small farmers to lend minor amounts as well as term loans.
The RBI internal group’s suggestion has come soon after the UPA government in the Budget announced a Rs 60,000-crore loan waiver package to debt-ridden farmers. However the experts group had included in its suggestions such a loan waiver package.
Professing for financial inclusion, the Radhakrishna experts group in its report has pragmatic that institutional credit should be extended to those excluded farmer households who do not have access to any source of credit. This should involve all institutions — scheduled commercial banks, regional rural banks and cooperatives and through them, agencies like business facilitators and business correspondents.
According to the experts group and agreed to by the RBI study, the first phase of this program, should focus on universal establishment of "no-frills" bank accounts.
In many cases, bank accounts should be accompanied by a small overdraft low-value general purpose credit card for small amount for first time entrants in banking system. Insurance policies are also part of the program in some districts.
"Routing of all payments to such households through the bank accounts, especially National Rural Employment Guarantee Scheme (NREGS), pension payments and other relief and social security payments will go further in capturing all cash flows in such bank accounts and encourage larger extension of credit to poor rural households," the RBI working group report said.
Friday, May 9, 2008
RBI directive against using garlands of currency fall on deaf ears
The Reserve Bank of India (RBI) has been making efforts to keep currency notes clean. In view of this the apex bank has issued directives to the banks not to staple notes.
Alpana Killawala, chief general manager of the public relations division of RBI said, "Whatever we do, we do through the banks. One of the challenges that we had was to do away with stapled notes, a habit that often results in the note getting torn. After issuing a directive to banks, they have done away with the stapling of bundles of currency notes."
Earlier RBI had issued directive that people should discourage using garlands made of currency notes- a common feature in north Indian weddings which seems to be falling on deaf ears.
Alpana Killawala told IANS on phone from Mumbai, "We issued a directive last year that currency notes should not be used in making garlands, which defaces the notes and shortens their life."
She said, "It's part of our continuing efforts of clean notes policy. But no one seems to be paying heed as most weddings, especially in north India, keep using such garlands. We can't take any action against the public. We can only sensitize them".
According to Alok Aggarwal, a sales executive in Delhi for people this directive does not mean anything. He said, "The tradition of making the bridegroom wear the garland of currency notes is a symbol of shagun (good luck).
"In most cases, this garland is then carefully stacked away. So where is the question of misusing the notes?" he asked.
Due to increasing demand for such garlands they are not only used in weddings but also during religious festivities, graduation ceremonies and anniversaries, they are easily available in the market.
"Currency note garlands are always in demand, especially during the wedding season. Some want garlands made of two-rupee notes, some want of 100-rupee notes," says Mohan Lal, a shopkeeper in central Delhi.
Meanwhile RBI is making efforts to inculcate "good habits" among the people - so as to encourage good quality notes.
Killawala said, "We have also asked them to tell people not to give stapled notes when they deposit such notes to the bank. Further, we made a movie in 2006 on the same subject which was telecast on Doordarshan."
The RBI even organized camps to educate people on how to handle currency notes.
"Our latest initiative is making a short film on the dos and don'ts of handling bank notes. People have to be discouraged from scribbling on notes and folding them. The movie will be ready for telecasting in another couple of months," she said.
"The trend of note garlands is mainly north India centric. Therefore, we will have to devise a program specifically for that area," she added.
Alpana Killawala, chief general manager of the public relations division of RBI said, "Whatever we do, we do through the banks. One of the challenges that we had was to do away with stapled notes, a habit that often results in the note getting torn. After issuing a directive to banks, they have done away with the stapling of bundles of currency notes."
Earlier RBI had issued directive that people should discourage using garlands made of currency notes- a common feature in north Indian weddings which seems to be falling on deaf ears.
Alpana Killawala told IANS on phone from Mumbai, "We issued a directive last year that currency notes should not be used in making garlands, which defaces the notes and shortens their life."
She said, "It's part of our continuing efforts of clean notes policy. But no one seems to be paying heed as most weddings, especially in north India, keep using such garlands. We can't take any action against the public. We can only sensitize them".
According to Alok Aggarwal, a sales executive in Delhi for people this directive does not mean anything. He said, "The tradition of making the bridegroom wear the garland of currency notes is a symbol of shagun (good luck).
"In most cases, this garland is then carefully stacked away. So where is the question of misusing the notes?" he asked.
Due to increasing demand for such garlands they are not only used in weddings but also during religious festivities, graduation ceremonies and anniversaries, they are easily available in the market.
"Currency note garlands are always in demand, especially during the wedding season. Some want garlands made of two-rupee notes, some want of 100-rupee notes," says Mohan Lal, a shopkeeper in central Delhi.
Meanwhile RBI is making efforts to inculcate "good habits" among the people - so as to encourage good quality notes.
Killawala said, "We have also asked them to tell people not to give stapled notes when they deposit such notes to the bank. Further, we made a movie in 2006 on the same subject which was telecast on Doordarshan."
The RBI even organized camps to educate people on how to handle currency notes.
"Our latest initiative is making a short film on the dos and don'ts of handling bank notes. People have to be discouraged from scribbling on notes and folding them. The movie will be ready for telecasting in another couple of months," she said.
"The trend of note garlands is mainly north India centric. Therefore, we will have to devise a program specifically for that area," she added.
Subscribe to:
Posts (Atom)