Bhubaneswar Reserve Bank of India regional office handed over as many as 1,440 fake notes of various denominations to the police. The value of these notes amounts to Rs 3.07 lakh. These fake notes will be sent for examination.
The circulation of these notes has signified the State is providing ground to the market for the fake notes. Though it is neighboring Andhra Pradesh which is a transit route for such a trade
The RBI receives counterfeit notes from the people for exchange thus it handover the same with the local police every six months. After this case is lodged and on its basis investigation is initiated.
Previously a couple of years back, Malgodown Police in Cuttack had apprehended fake notes of Rs 3 lakh and arrested several persons in this connection. Police traced the ground of fake currency in Andhra Pradesh but later police lost track of the persons.
Wednesday, May 13, 2009
RBI draft guidelines make repossession of vehicles easier for banks
Couple of years ago, Prakash Kaur had moved the Supreme Court against a leading bank as bank had taken away his car on the grounds he was not repaying the loan. Bank argued that it took the vehicle in its custody because Kaur was not repaying the loan he had taken to buy the car.
The apex court gave judgment in favor of Kaur and many other such borrowers, but the judgment created a dilemma amongst the banks exactly when a bank can take away a borrower's vehicle.
Bankers reported that misinterpretations of the Supreme Court order bought repossessions (banking jargon for takeover of a vehicle or asset for which a person has taken a loan and is repaying it) to a halt as the judgment was "heavily biased in favor of the defaulting borrower."
Bankers stated after the regulatory clarification situation has improved and may give a boost to the auto lending activity.
On April 24, 2009 the Reserve Bank of India issued draft guidelines in which the NBFCs has been asked to include clauses in the loan document on the process and the conditions under which their vehicle can be repossessed in case of default.
Mahesh Thakkar, general secretary, Finance Industry Development Council (FIDC), pointed out the RBI guidelines has given a clear distinction between recovery agents and repossession agents, which the industry was looking for.
Thus the recovery agent is behind the defaulter, while the repossession agent is behind the underlying security, i.e. vehicle. He said, "We are repossession agents, often mistaken to be recovery agents and this created a problem for us in the last 3-4 years".
Govind Sankaranarayanan, chief financial officer, Tata Capital, pointed out, "The draft guidelines attempt to formalize the means with which repossession of secured asset can be done. We have always been having a clear clause in the loan document on the procedure for repossession."
When asked whether the RBI notification will provide a fillip to auto lending, Sankaranarayanan replied, "Now that there are formal guidelines from RBI, it will provide some degree of comfort to lend. It is a step in the right direction."
On the other hand the Indian Banks' Association (IBA) is in a process of issuing a clarification on the issue. When asked in case the IBA clarification is issued will there be increase in lending activity, the head of loans at a leading bank replied, "It should, because the financials will become easy on credit."
"We finance both old and new vehicles and the margins are very high in old-vehicle financing. With the code of conduct in place, even marginal cases will get clearance from the credit departments. This will definitely boost auto financing, especially for commercial vehicles."
Ramesh Ayer, managing director, Mahindra Finance, explained the confusion over how, when and who can repossess will now get removed. He said, "With the RBI guidelines, legally enforcing the document becomes easy. Also, when matters are taken to the court, the case will become stronger for us as all the clauses will now be clearly mentioned in the contract".
The apex court gave judgment in favor of Kaur and many other such borrowers, but the judgment created a dilemma amongst the banks exactly when a bank can take away a borrower's vehicle.
Bankers reported that misinterpretations of the Supreme Court order bought repossessions (banking jargon for takeover of a vehicle or asset for which a person has taken a loan and is repaying it) to a halt as the judgment was "heavily biased in favor of the defaulting borrower."
Bankers stated after the regulatory clarification situation has improved and may give a boost to the auto lending activity.
On April 24, 2009 the Reserve Bank of India issued draft guidelines in which the NBFCs has been asked to include clauses in the loan document on the process and the conditions under which their vehicle can be repossessed in case of default.
Mahesh Thakkar, general secretary, Finance Industry Development Council (FIDC), pointed out the RBI guidelines has given a clear distinction between recovery agents and repossession agents, which the industry was looking for.
Thus the recovery agent is behind the defaulter, while the repossession agent is behind the underlying security, i.e. vehicle. He said, "We are repossession agents, often mistaken to be recovery agents and this created a problem for us in the last 3-4 years".
Govind Sankaranarayanan, chief financial officer, Tata Capital, pointed out, "The draft guidelines attempt to formalize the means with which repossession of secured asset can be done. We have always been having a clear clause in the loan document on the procedure for repossession."
When asked whether the RBI notification will provide a fillip to auto lending, Sankaranarayanan replied, "Now that there are formal guidelines from RBI, it will provide some degree of comfort to lend. It is a step in the right direction."
On the other hand the Indian Banks' Association (IBA) is in a process of issuing a clarification on the issue. When asked in case the IBA clarification is issued will there be increase in lending activity, the head of loans at a leading bank replied, "It should, because the financials will become easy on credit."
"We finance both old and new vehicles and the margins are very high in old-vehicle financing. With the code of conduct in place, even marginal cases will get clearance from the credit departments. This will definitely boost auto financing, especially for commercial vehicles."
Ramesh Ayer, managing director, Mahindra Finance, explained the confusion over how, when and who can repossess will now get removed. He said, "With the RBI guidelines, legally enforcing the document becomes easy. Also, when matters are taken to the court, the case will become stronger for us as all the clauses will now be clearly mentioned in the contract".
Tuesday, May 5, 2009
RBI requested to strengthen norms for the end use of bank credit to help micro units
Arjun Sengupta noted economist in its report had advised that RBI should direct banks to increase flow of funds to micro enterprises at reasonable rates just pushing in more liquidity in the system is not enough. He said there is need of strong norms for end use of bank credit.
The National Commission for Enterprises in the Unorganized Sector (NCEUS) pointed out, "Liquidity in itself will not solve the problem (faced by micro enterprises in getting credit) unless there are directive to banks on the end use of credit, in particular, more credit has to flow in favor of vast informal sector...." .
The NCEUS, headed by noted economist Arjun Sengupta, last week submitted its report on 'The Challenge of Employment in India - an Informal Economy Perspective' submitted said the recent policy measures to undertake the impact of the global meltdown have not been of much help for micro units.
Banks liquidity has witnessed the growth of Rs 45,28,277 crore in November 2008 from Rs 34,67,098 crore in March 2007 after RBI took steps to tackle the crisis.
In spite of lowering of prime lending rate, banks are not passing full benefits to the customers. Loans are given at a minimum of 16 per cent, to the micro and small units which are almost double the rate offered to large industries.
It stated, "There is an urgent need to reorient banking system and its goals in general and credit policy in particular ".
The National Commission for Enterprises in the Unorganized Sector (NCEUS) pointed out, "Liquidity in itself will not solve the problem (faced by micro enterprises in getting credit) unless there are directive to banks on the end use of credit, in particular, more credit has to flow in favor of vast informal sector...." .
The NCEUS, headed by noted economist Arjun Sengupta, last week submitted its report on 'The Challenge of Employment in India - an Informal Economy Perspective' submitted said the recent policy measures to undertake the impact of the global meltdown have not been of much help for micro units.
Banks liquidity has witnessed the growth of Rs 45,28,277 crore in November 2008 from Rs 34,67,098 crore in March 2007 after RBI took steps to tackle the crisis.
In spite of lowering of prime lending rate, banks are not passing full benefits to the customers. Loans are given at a minimum of 16 per cent, to the micro and small units which are almost double the rate offered to large industries.
It stated, "There is an urgent need to reorient banking system and its goals in general and credit policy in particular ".
RBI to issue new Rs 100 notes with inset letter ‘R’
Soon Rs.100 denomination notes will be in circulation in the market. The Reserve Bank of India will be issuing a new Rs.100 denomination notes with inset letter `R’ in both numbering panels in Mahatma Gandhi series - 2005 bearing the signature of RBI Governor D Subba Rao.
Now the notes design will be similar in all respects to the notes in Mahatma Gandhi Series -2005 with additional new security features issued on August 24, 2005, except for the change in the inset letter. An official press release stated notes in the denomination of Rs.100 issued by the RBI in the past will continue to be a legal tender.
Now the notes design will be similar in all respects to the notes in Mahatma Gandhi Series -2005 with additional new security features issued on August 24, 2005, except for the change in the inset letter. An official press release stated notes in the denomination of Rs.100 issued by the RBI in the past will continue to be a legal tender.
RBI handed over 1,440 fake notes of various denominations to the police
Bhubaneswar Reserve Bank of India regional office handed over as many as 1,440 fake notes of various denominations to the police. The value of these notes amounts to Rs 3.07 lakh. These fake notes will be sent for examination.
The circulation of these notes has signified the State is providing ground to the market for the fake notes. Though it is neighboring Andhra Pradesh which is a transit route for such a trade
The RBI receives counterfeit notes from the people for exchange thus it handover the same with the local police every six months. After this case is lodged and on its basis investigation is initiated.
Previously a couple of years back, Malgodown Police in Cuttack had apprehended fake notes of Rs 3 lakh and arrested several persons in this connection. Police traced the ground of fake currency in Andhra Pradesh but later police lost track of the persons.
The circulation of these notes has signified the State is providing ground to the market for the fake notes. Though it is neighboring Andhra Pradesh which is a transit route for such a trade
The RBI receives counterfeit notes from the people for exchange thus it handover the same with the local police every six months. After this case is lodged and on its basis investigation is initiated.
Previously a couple of years back, Malgodown Police in Cuttack had apprehended fake notes of Rs 3 lakh and arrested several persons in this connection. Police traced the ground of fake currency in Andhra Pradesh but later police lost track of the persons.
Wednesday, April 29, 2009
Banks continue to park surplus funds with RBI, earn profits of 50-100 basis points a day
Last week the Reserve Bank of India (RBI) had cut reverse repo rate by 25 basis points, the funds which banks park with RBI. In spite of the cut the options seems to be attractive among the banks.
Banks, especially Government owned, borrow against their excess holdings of government securities at a lower rate under Clearing Corporation’s Collateralized Borrowing and Lending Obligation (CBLO) mechanism and invest these funds at a higher rate with RBI.
By doing so banks are making profits of 50-100 basis points a day.
For instance: On Monday a bank borrows against its surplus government securities holding at the biased average interest rate of 2.72 per cent under CBLO and invest funds at RBI’s Reverse Repo (R/R) window at 3.25 per cent. Therefore bank makes gain of 53 basis points (100 basis points equals 1 per cent) in just a day.
However CBLO is a discounted money market device which allows banks and other market participants to borrow and lend funds via electronic book entry. It inflicts a responsibility on the borrower/lender to return the money borrowed/receive the money lent, at a specified future date. The principal charge on securities is held back (with CCIL) for the amount borrowed/lent.
As per banking sources, the central bank on April 21 had reduced the reverse repo rate with an aim to encourage banks to lend to the productive sectors of the economy. But, due to slack credit off take, banks with surplus Statutory Liquidity Ratio (SLR) portfolio are making the most of the arbitrage opportunity due to differential in the interest rate between CBLO and RBI’s R/R window.
In spite of the reverse repo rate cut, during the last four working days after the RBI’s rate cut, banks, on an average, have invested around Rs 1 lakh crore daily with the RBI.
As of March-end 2009, listed commercial banks’ investment in Statutory Liquidity Ratio (SLR) securities — the segment of net demand and time liabilities (NDTL) that banks have to park in government securities has increased to 28.1 per cent from 27.8 per cent a year ago.
As per RBI records Banks, as of March-end 2009, were holding excess government securities worth Rs 1,13,817 crore or 2.7 per cent over the prescribed SLR of 24 per cent of NDTL.
In view of that at the beginning of April CBLO has witnessed rates as low as 0.50 per cent, thus banks would have made a huge earning a clean return of 3 per cent in just a day.
A senior public sector bank official explained, “Feeble credit offtake coupled with the fear of bad loans going up in the current scenario of economic slowdown is prompting banks to park their surplus funds with the RBI. Not many bankable loan proposals are coming our way. So, it’s a Hobson’s choice for us.”
As per RBI’s statistics, scheduled commercial banks have together disbursed Rs 1,429 crore in the fortnight ended April 10, 2009. This, bankers believe, is an indication of a slowdown.
Market players believe that banks continue to flood the central bank’s reverse repo window with surplus liquidity in spite of the cut in the interest rate, therefore the regulator might move to limit surplus funds the banks park by imposing a cap.
Banks, especially Government owned, borrow against their excess holdings of government securities at a lower rate under Clearing Corporation’s Collateralized Borrowing and Lending Obligation (CBLO) mechanism and invest these funds at a higher rate with RBI.
By doing so banks are making profits of 50-100 basis points a day.
For instance: On Monday a bank borrows against its surplus government securities holding at the biased average interest rate of 2.72 per cent under CBLO and invest funds at RBI’s Reverse Repo (R/R) window at 3.25 per cent. Therefore bank makes gain of 53 basis points (100 basis points equals 1 per cent) in just a day.
However CBLO is a discounted money market device which allows banks and other market participants to borrow and lend funds via electronic book entry. It inflicts a responsibility on the borrower/lender to return the money borrowed/receive the money lent, at a specified future date. The principal charge on securities is held back (with CCIL) for the amount borrowed/lent.
As per banking sources, the central bank on April 21 had reduced the reverse repo rate with an aim to encourage banks to lend to the productive sectors of the economy. But, due to slack credit off take, banks with surplus Statutory Liquidity Ratio (SLR) portfolio are making the most of the arbitrage opportunity due to differential in the interest rate between CBLO and RBI’s R/R window.
In spite of the reverse repo rate cut, during the last four working days after the RBI’s rate cut, banks, on an average, have invested around Rs 1 lakh crore daily with the RBI.
As of March-end 2009, listed commercial banks’ investment in Statutory Liquidity Ratio (SLR) securities — the segment of net demand and time liabilities (NDTL) that banks have to park in government securities has increased to 28.1 per cent from 27.8 per cent a year ago.
As per RBI records Banks, as of March-end 2009, were holding excess government securities worth Rs 1,13,817 crore or 2.7 per cent over the prescribed SLR of 24 per cent of NDTL.
In view of that at the beginning of April CBLO has witnessed rates as low as 0.50 per cent, thus banks would have made a huge earning a clean return of 3 per cent in just a day.
A senior public sector bank official explained, “Feeble credit offtake coupled with the fear of bad loans going up in the current scenario of economic slowdown is prompting banks to park their surplus funds with the RBI. Not many bankable loan proposals are coming our way. So, it’s a Hobson’s choice for us.”
As per RBI’s statistics, scheduled commercial banks have together disbursed Rs 1,429 crore in the fortnight ended April 10, 2009. This, bankers believe, is an indication of a slowdown.
Market players believe that banks continue to flood the central bank’s reverse repo window with surplus liquidity in spite of the cut in the interest rate, therefore the regulator might move to limit surplus funds the banks park by imposing a cap.
Wednesday, April 22, 2009
RBI recommends uniform formula for restructured loans
The Reserve Bank of India has formulated a uniform formula to work out the reduction in fair value of restructured loans.
Reduction is the cut down value of loans that have come for restructuring.
Banks rate restructured loans differently in different economic cycles. This is because the reduction or depreciation in rate generally linked with the universal rise in the interest rates in the economy.
The formula was particularly required due to higher provisioning because of rise in the rate of interest during last few years which added to the financial difficulties when banks’ margins were already under stress because of the current downturn.
Thus, the RBI analyzed that the formula can be modified in such a way that the changes in fair value of the loan credited to the changes in market interest rates are not taken into account while calculating the reduction.
RBI rule
Last month the Reserve Bank of India had directed the banks to consider floating provisions as part of tier capital II instead of deducting them to arrive at net NPA position for the financial year ended March 2009. But on Thursday RBI postponed the implementation of rule that prevents banks from deducting floating provision (made for non-performing assets) from the Gross NPAs for the financial year 2009-10.
Reduction is the cut down value of loans that have come for restructuring.
Banks rate restructured loans differently in different economic cycles. This is because the reduction or depreciation in rate generally linked with the universal rise in the interest rates in the economy.
The formula was particularly required due to higher provisioning because of rise in the rate of interest during last few years which added to the financial difficulties when banks’ margins were already under stress because of the current downturn.
Thus, the RBI analyzed that the formula can be modified in such a way that the changes in fair value of the loan credited to the changes in market interest rates are not taken into account while calculating the reduction.
RBI rule
Last month the Reserve Bank of India had directed the banks to consider floating provisions as part of tier capital II instead of deducting them to arrive at net NPA position for the financial year ended March 2009. But on Thursday RBI postponed the implementation of rule that prevents banks from deducting floating provision (made for non-performing assets) from the Gross NPAs for the financial year 2009-10.
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