There has been increase in instances of bank robbery in view of this the Reserve Bank of India has issued a circular to the commercial banks in which it has suggested the banks to review the system in force for operation of safe deposit vaults/lockers at their branches and should take required necessary steps. The apex bank has advised, “The security procedure should be well-documented and the staff concerned should be properly trained in the procedure. The internal auditors of the bank should ensure that the procedures are strictly adhered to.”
In the circular the apex bank has not given any specific recommendations on the sensitive issue, whether banks are liable to compensate the customers in case of burglary of locker. According to RBI circular the relationship between the bank and the locker hirer is like the “bailor and bailee” and not “landlord and tenant”.
The commercial banks have been shedding off all claims of their shoulders in case of locker burglary. The banks say the relationship between a bank and the person hiring the locker in one of landlord and tenant. As per legal argument by the banks there is no “entrustment” of contents placed in lockers by the depositors to the bank, thus the banks are not responsible for its contents.
In one of the case related to locker robbery the National Consumer Disputes Redressal Commission (NCDRC) rejected banks’ argument that depositors were the only tenants of the lockers therefore banks can not be held liable for any loss suffered by them.
Earlier on July 11, 2000 NCDRC in its order given in a case involving locker robbery in one of the branches of Bank of Maharashtra, had rejected the bank’s argument and held that “the depositors had taken the lockers on rent only because of the security provided by the bank and it is not simply a landlord and tenant relationship.” The Commission further said, “The depositors have kept jewellery and other valuable articles on the assurance that the bank will provide complete security...” The NCDRC order had said, “Another important aspect of the case is that the depositors cannot have access to the lockers except with the help of the bank because one key is retained by the bank and unless both keys are used, the depositors cannot open the lockers. We have consistently held that the relationship between the bank and depositor is not that of the landlord and the tenant.”
Monday, August 16, 2010
Thursday, August 12, 2010
RBI issues discussion paper on new banking license
The Reserve Bank on Wednesday issued discussion paper for the entry of new private sector banks in which it proposed to bring down the foreign investment in new private sector banks to below 50% from 74%. It is believed this suggestion of RBI can help some lenders in retaining their Indian-owned status as two leading private sector lenders- ICICI Bank and HDFC Bank had lost the status of Indian-owned banks.
RBI said, "Since the objective is to create strong domestic banking entities and a diversified banking sector ... aggregate non-resident investment, including FDI, NRI and FII in these banks could be capped at a suitable level below 50% and locked at that level for the initial 10 years."
The two private sector lenders ICICI Bank and HDFC Bank have been categorized as foreign-owned, Indian-controlled lenders, as FDI in them had increased over 50 per cent when norms on calculating FDI changed to include all types of foreign investment including FDI, FII, NRI, ADR, GDR and foreign currency convertible bonds.
Possibly the new norms of calculating FDI might have repercussions on their downstream investment like in subsidiaries.
According to discussion paper the downstream investment of banks would not have impact on monitoring indirect foreign investment, if the foreign investment is below 50%.
But experts say, it is not clear whether these proposals if implemented will they cover existing banks or not.
KPMG Financial Services Tax Leader Punit Shah said, "It is not clear. However, it is possible that even the existing banks will have to comply with the new cap over a period of time for a level playing field."
Giving basis for putting restriction on foreign investment at 50%, the discussion paper said, "This would enable foreign capital to be used in the promotion of domestic banks ... This would allow for foreign technical collaboration in setting up domestic banks."
RBI released discussion paper on issuing new banking licenses to increase competition and expand the banking system. It has mentioned pros and cons of various norms such as minimum capital requirements and limits on promoters as well as foreign shareholding.
Currently RBI is taking into consideration applications from 18 foreign entities, including Goldman Sachs, Morgan Stanley, Industrial and Commercial Bank of China (ICBC) and National Australia Bank to start operations in India.
RBI said, "Since the objective is to create strong domestic banking entities and a diversified banking sector ... aggregate non-resident investment, including FDI, NRI and FII in these banks could be capped at a suitable level below 50% and locked at that level for the initial 10 years."
The two private sector lenders ICICI Bank and HDFC Bank have been categorized as foreign-owned, Indian-controlled lenders, as FDI in them had increased over 50 per cent when norms on calculating FDI changed to include all types of foreign investment including FDI, FII, NRI, ADR, GDR and foreign currency convertible bonds.
Possibly the new norms of calculating FDI might have repercussions on their downstream investment like in subsidiaries.
According to discussion paper the downstream investment of banks would not have impact on monitoring indirect foreign investment, if the foreign investment is below 50%.
But experts say, it is not clear whether these proposals if implemented will they cover existing banks or not.
KPMG Financial Services Tax Leader Punit Shah said, "It is not clear. However, it is possible that even the existing banks will have to comply with the new cap over a period of time for a level playing field."
Giving basis for putting restriction on foreign investment at 50%, the discussion paper said, "This would enable foreign capital to be used in the promotion of domestic banks ... This would allow for foreign technical collaboration in setting up domestic banks."
RBI released discussion paper on issuing new banking licenses to increase competition and expand the banking system. It has mentioned pros and cons of various norms such as minimum capital requirements and limits on promoters as well as foreign shareholding.
Currently RBI is taking into consideration applications from 18 foreign entities, including Goldman Sachs, Morgan Stanley, Industrial and Commercial Bank of China (ICBC) and National Australia Bank to start operations in India.
By year-end polymer notes of Rs 10 denomination will be in circulation
By the year-end, the Reserve Bank of India (RBI) is planning to introduce polymer (plastic) notes of Rs10 denomination and later on it will introduce such notes of other denominations. The apex bank has planned to introduce polymer notes because the paper notes with time get soiled, washed, partially torn and mutilated and such notes volume is increasing and the cost of production is very high.
RBI sources said, “We will start with Rs. 10 notes on an experiment basis and then based on it, Rs. 20 and Rs. 50 notes will also be issued.”
Polymer notes are in circulation in countries such as New Zealand, Sri Lanka, Malaysia and Hong Kong. The sources said these countries have additional capacities to produce plastic notes.
The sources said, “The RBI could have imported plastic notes from these countries but after some consideration we have decided to produce them internally.” Currencies of Rs.10 are in maximum circulation and its production cost is more compared to notes of other denominations.
Regarding the fake notes, he said that though there were “no cases of such notes in Rs. 10 denomination, plastic notes would have enough safety features.”
The sources informed that RBI has no plans to issue plastic notes of Rs 5 denominations it is focusing more on its coins.
RBI sources said, “We will start with Rs. 10 notes on an experiment basis and then based on it, Rs. 20 and Rs. 50 notes will also be issued.”
Polymer notes are in circulation in countries such as New Zealand, Sri Lanka, Malaysia and Hong Kong. The sources said these countries have additional capacities to produce plastic notes.
The sources said, “The RBI could have imported plastic notes from these countries but after some consideration we have decided to produce them internally.” Currencies of Rs.10 are in maximum circulation and its production cost is more compared to notes of other denominations.
Regarding the fake notes, he said that though there were “no cases of such notes in Rs. 10 denomination, plastic notes would have enough safety features.”
The sources informed that RBI has no plans to issue plastic notes of Rs 5 denominations it is focusing more on its coins.
Tuesday, August 10, 2010
FM accepts banks not following RBI norms for opening no-frill accounts
Finance Minister Pranab Mukherjee has accepted in Lok Sabha that some banks are not following guidelines on opening no frill zero balance accounts in rural areas. He said efforts are being made to provide banking facilities to remotest part of the country through various means.
The finance minister said some of the banks might not be observing guidelines of the RBI in opening no-frill, zero balance accounts in rural areas. He added banks have been told to listen to the political leadership and the state governments in addressing the grievances of the people.
Several members across political parties supported finance minister views.
He added he has been receiving request from Chief Ministers that meetings of state level bankers should be held. Likewise officers have been instructed to hold meetings with bank officials at the district level in order to eliminate the role of the middleman.
He said, there is a need for a “vigilant mechanism”, therefore branch officers are being made accountable.
In a reply to another question, Minister of State for Finance Namo Narain Meena ruled out any special incentives for bank officials deployed in rural areas. He said, "It is part of their normal work."
The finance minister said some of the banks might not be observing guidelines of the RBI in opening no-frill, zero balance accounts in rural areas. He added banks have been told to listen to the political leadership and the state governments in addressing the grievances of the people.
Several members across political parties supported finance minister views.
He added he has been receiving request from Chief Ministers that meetings of state level bankers should be held. Likewise officers have been instructed to hold meetings with bank officials at the district level in order to eliminate the role of the middleman.
He said, there is a need for a “vigilant mechanism”, therefore branch officers are being made accountable.
In a reply to another question, Minister of State for Finance Namo Narain Meena ruled out any special incentives for bank officials deployed in rural areas. He said, "It is part of their normal work."
Monday, July 26, 2010
Commercial banks don’t require approval from RBI to open mobile branches in villages
On Friday the Reserve Bank took another major step towards bringing about financial inclusion by allowing the commercial banks to open mobile branches without its approval in areas with less than 50,000 population.
In a notification issued by the central bank said, “It has been decided to further liberalize the branch authorization policy and grant general permission to domestic scheduled commercial banks (other than RRBs) to operationalise mobile branches in tier 3 to tier 6 centers (with population up to 49,999 as per Census 2001) subject to reporting."
This move of RBI will help banks to take banking services to unbanked areas and help promoting financial inclusion.
The notification said, the mobile branch scheme is likely to extend banking facilities through a well protected van having two or three officials of the bank sitting in it with books, safe containing cash etc.
The central bank said, the mobile branch will visit only marked places on the specific days and it will not visit the villages or centers where there are cooperative banks branches and are being served by regular branches of commercial banks.
The notification said the van will be stationed in each location for a reasonable time on specified days and specified hours so that people can use its services easily and properly. It also added the record of the business transactions at the mobile branch will be kept in the books of the base branch or data center.
It said, it has also been decided that general permission will be given to scheduled commercial banks (other than RRBs) to operate mobile ATMs at places identified by them and for this they don’t need to take any prior permission from the Reserve Bank.
In a notification issued by the central bank said, “It has been decided to further liberalize the branch authorization policy and grant general permission to domestic scheduled commercial banks (other than RRBs) to operationalise mobile branches in tier 3 to tier 6 centers (with population up to 49,999 as per Census 2001) subject to reporting."
This move of RBI will help banks to take banking services to unbanked areas and help promoting financial inclusion.
The notification said, the mobile branch scheme is likely to extend banking facilities through a well protected van having two or three officials of the bank sitting in it with books, safe containing cash etc.
The central bank said, the mobile branch will visit only marked places on the specific days and it will not visit the villages or centers where there are cooperative banks branches and are being served by regular branches of commercial banks.
The notification said the van will be stationed in each location for a reasonable time on specified days and specified hours so that people can use its services easily and properly. It also added the record of the business transactions at the mobile branch will be kept in the books of the base branch or data center.
It said, it has also been decided that general permission will be given to scheduled commercial banks (other than RRBs) to operate mobile ATMs at places identified by them and for this they don’t need to take any prior permission from the Reserve Bank.
Monday, July 19, 2010
RBI says, banks cannot declare your account ‘inoperative’
Many of us don’t know about norms which have been formulated by the Reserve Bank of India (RBI) to protect our interest and rights which bank tend to flout. One of the norms is on ‘inoperative accounts’.
If you have not operated your bank account for a long time there is every possibility of your bank to flout the instructions given by RBI and declare your account as ‘inoperative’ without giving you any notice and even dishonoring your cheques issued on that account.
To protect your interests, you must know what exactly the regulator says, firstly, RBI says an account (both savings and current) can be treated as ‘inoperative account’ or ‘dormant’ only if there are no customer-induced transactions in the account for more than two years.
It also states that if interest from a fixed deposit is being credited into the account, then it should be considered as customer –induced transaction and should not be considered as a dormant account.
More important, the RBI circular issued on August 22, 2008 related to “Unclaimed deposits/Inoperative accounts in banks”, to all scheduled commercial banks urges banks to be pro-active and contact customers whose accounts have remained inoperative for over a year and find out why there are no transactions.
If the consumer has changed his residence or place of work, then most probably, his account will remain dormant. There are also consumers who keep accounts in their hometown and do not operate them regularly.
Therefore the RBI has instructed banks to not only contact customers who have not operated their account for a long time, but also transfer the money in the account to the new account of the customer, if the customer has shifted residence (or changed the job) and opened an account in another bank.
The RBI has also made mandatory for the banks that they should inform customers before declaring an account as dormant and give the account holder sufficient time to the customer to operate the account. If all such efforts fail, then only bank should declare an account as inoperative.
In case the customer contacts the bank after an account has been declared as dormant, then bank should facilitate reactivation of the account after verifying the signature and the identity of the account holder.
In this process bank must ensure the customer should not face any difficulty and inconvenience also no charges should be taken for activation, the RBI says.
After all these norms, still we find banks are exploiting the ignorant customers and violating them with impunity.
If you have not operated your bank account for a long time there is every possibility of your bank to flout the instructions given by RBI and declare your account as ‘inoperative’ without giving you any notice and even dishonoring your cheques issued on that account.
To protect your interests, you must know what exactly the regulator says, firstly, RBI says an account (both savings and current) can be treated as ‘inoperative account’ or ‘dormant’ only if there are no customer-induced transactions in the account for more than two years.
It also states that if interest from a fixed deposit is being credited into the account, then it should be considered as customer –induced transaction and should not be considered as a dormant account.
More important, the RBI circular issued on August 22, 2008 related to “Unclaimed deposits/Inoperative accounts in banks”, to all scheduled commercial banks urges banks to be pro-active and contact customers whose accounts have remained inoperative for over a year and find out why there are no transactions.
If the consumer has changed his residence or place of work, then most probably, his account will remain dormant. There are also consumers who keep accounts in their hometown and do not operate them regularly.
Therefore the RBI has instructed banks to not only contact customers who have not operated their account for a long time, but also transfer the money in the account to the new account of the customer, if the customer has shifted residence (or changed the job) and opened an account in another bank.
The RBI has also made mandatory for the banks that they should inform customers before declaring an account as dormant and give the account holder sufficient time to the customer to operate the account. If all such efforts fail, then only bank should declare an account as inoperative.
In case the customer contacts the bank after an account has been declared as dormant, then bank should facilitate reactivation of the account after verifying the signature and the identity of the account holder.
In this process bank must ensure the customer should not face any difficulty and inconvenience also no charges should be taken for activation, the RBI says.
After all these norms, still we find banks are exploiting the ignorant customers and violating them with impunity.
Friday, July 16, 2010
The Indian rupee gets new design
Emperor Sher Shah Suri first issued the rupiya. The modern India has adopted most of its national symbols and motifs from it. In the near future the country might be having a new symbol to denote its currency.
Which used to be once a medieval silver coin has aspired to be a major global currency alongside the US dollar ($), the British sterling pound (£), the euro (e),the yen (¥) and the renminbi. Last year government decided that Indian rupee should be uniquely identified and instantly recognized, so it announced a contest to select a symbol to replace the notation Rs. The word rupee and the notation Rs is being used by other countries in the region, such as Mauritius, Nepal, Pakistan, Seychelles, and Sri Lanka.
Among many participants, a shy 31-year-old Tamil Nadu-born researcher, who was also the first Indian scholar to be awarded a PhD in industrial design, for his work on ancient Tamil typography, design of a national symbol will come to be recognized around the world. The new symbol has a combination of Hindi and Roman scripts. Government final decision has come 17 months after the contest was announced.
D Udaya Kumar, the winner of the contest, told ET, “This is possibly the greatest achievement of my life.” Few people get to start their careers on such a professional and creative high.
The Indian rupee has grown in stature since economic and financial sector reforms started in 1991. At present the old symbol is highly recognized in the world market and under the control of the Reserve Bank of India it has remained steady while many major currencies, especially the euro, have been battered by the storm in financial markets. Earlier the rupee exchange rate was Rs 17.5 against the US dollar in 1990, when the country faced a severe balance of payment crisis today rupee is in strong position at 46.21 against the dollar. India’s foreign exchange reserves are now at $279 billion, a stark contrast to March 1990, when the $3.96 billion of reserves were sufficient only for three weeks worth of imports.
However the brand experts have applauded the new symbol. Brand consultant Harish Bijoor said, “The new symbol is an amalgamation of being heritage-oriented and modern. In that sense, it rightly portrays the transformation of India from an underdeveloped country in the past to a fast-developing nation now and a developed one in the future. The new symbol only needs to be marketed well now.” If money-changing counters at airports around the world choose to add Udaya Kumar’s symbol to their display boards can be a good measure of the currency’s global reach. Though, the new symbol will gain currency gradually. Man working at IIT Guwahati design labs will be proud and happy watching it happens.
Which used to be once a medieval silver coin has aspired to be a major global currency alongside the US dollar ($), the British sterling pound (£), the euro (e),the yen (¥) and the renminbi. Last year government decided that Indian rupee should be uniquely identified and instantly recognized, so it announced a contest to select a symbol to replace the notation Rs. The word rupee and the notation Rs is being used by other countries in the region, such as Mauritius, Nepal, Pakistan, Seychelles, and Sri Lanka.
Among many participants, a shy 31-year-old Tamil Nadu-born researcher, who was also the first Indian scholar to be awarded a PhD in industrial design, for his work on ancient Tamil typography, design of a national symbol will come to be recognized around the world. The new symbol has a combination of Hindi and Roman scripts. Government final decision has come 17 months after the contest was announced.
D Udaya Kumar, the winner of the contest, told ET, “This is possibly the greatest achievement of my life.” Few people get to start their careers on such a professional and creative high.
The Indian rupee has grown in stature since economic and financial sector reforms started in 1991. At present the old symbol is highly recognized in the world market and under the control of the Reserve Bank of India it has remained steady while many major currencies, especially the euro, have been battered by the storm in financial markets. Earlier the rupee exchange rate was Rs 17.5 against the US dollar in 1990, when the country faced a severe balance of payment crisis today rupee is in strong position at 46.21 against the dollar. India’s foreign exchange reserves are now at $279 billion, a stark contrast to March 1990, when the $3.96 billion of reserves were sufficient only for three weeks worth of imports.
However the brand experts have applauded the new symbol. Brand consultant Harish Bijoor said, “The new symbol is an amalgamation of being heritage-oriented and modern. In that sense, it rightly portrays the transformation of India from an underdeveloped country in the past to a fast-developing nation now and a developed one in the future. The new symbol only needs to be marketed well now.” If money-changing counters at airports around the world choose to add Udaya Kumar’s symbol to their display boards can be a good measure of the currency’s global reach. Though, the new symbol will gain currency gradually. Man working at IIT Guwahati design labs will be proud and happy watching it happens.
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