SBI Pension Fund can manage staff corpus

SBI Pension Fund has received permission from the Pension Fund Regulatory and Development Authority (PFRDA) to manage the pension money of State Bank of India employees. Prior to the approval, the fund with a corpus of Rs 15,000 Cr. was managed by an in-house trust. According to sources, initially, SBI PF has been given around Rs 2,000 Cr. of the total funds to manage. The remaining corpus amount will be gradually transferred to SBI PF. This move will substantially increase the funds under the management of SBI Pension Fund. However, it is learnt, that the transfer is yet to the approved by the SBI Board. SBI PF has also been allowed to charge higher rates for managing the pension funds of SBI...

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Govt to support banks merger: Mukherjee

The Central Government would support public sector banks to merge if they wanted, provided they fulfilled the guidelines of the Reserve Bank of India (RBI) and the Securities and Exchange Board of India (SEBI), Finance Minister Pranab Mukherjee said on Monday.“If someone decides to merge, if we see it is in conformity with our policy and if we find that parameters are being followed as per SEBI and RBI guidelines,” then the government would play a “supportive role,” he said in reply to a calling attention motion in the Lok Sabha.Maintaining that the government had itself not taken any initiative to ask public sector banks to go for merger, he said it did not intend to interfere in their routine...

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Govt not forcing public sector banks on consolidation'

The Finance Minister, Mr Pranab Mukherjee, on Monday said that although mergers and acquisitions are needed in the interest of the economy, the Government was not forcing public sector banks (PSBs) to go in for consolidation.He made it clear that the Government would endorse consolidation proposals of PSBs if the parameters were in conformity with the Securities and Exchange Board of India and Reserve Bank of India guidelin...

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Centre puts SBI merger on hold

The State Bank of India chairman, Mr O.P. Bhatt, has been asked by the ministry of finance, department of financial services, to withhold the merger process of the State Bank of Indore with itself.In a confidential letter to the SBI chairman dated October 8, (which is in the possession of this newspaper), the ministry said, “You are requested to kindly consider any further acquisition of the Associate Banks only after a view is crystallised on the subject by the government.”The letter was in reply to the three letters sent in July, August and September by the SBI regarding its proposed acquisition of its associate banks. The finance ministry said that the government is presently “considering...

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RBI Reference rate for US dollar and Euro

The Reserve Bank of India today fixed the Reference rate for the US currency at Rs 46.58 per dollar and the single European unit at Rs 69.54 per euro from Rs 46.41 per dollar and Rs 69.26 per euro, respectively, yesterday.In a note issued here by the apex bank, the exchange rates of Great Britain's Pound and Japanese Yen against the Rupee have been given as Rs 77.5650 per pound and Rs 52.49 per 100 yen, respectively, based on the Reference rate for US dollar and middle rates of the cross currency quotes at noon.The Reference rate is based on 12 noon rates of a few select banks in Mumbai and the SDR-Rupee rate will be based on this rate, the release add...

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Union Bank starts Auditing Branches

After some of its branches were interrogated by the income-tax department for their involvement in the Madhu Koda money-laundering case, state-owned Union Bank has started auditing the accounts of the branches which had shown high transactions.Talking to FE, a top brass of the bank said on condition of anonymity, “We have already asked some of those branches to go for fresh audit that are having high-value transactions.” However, he refused to give any further details.The bank official stressed that entire transactions in his bank was in compliance with Know-your-customer (KYC) and anti-money laundering (AML) norms.Another official of the bank said that like other banks, all the branches of...

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Corporation, Andhra & Dena Bank hot picks on M&A street

Corporation Bank, Andhra Bank and Dena Bank, are the hot favourites takeover targets among the large PSU banks which met the FinanceMinistry officials on Wednesday.Chiefs of Punjab National Bank, Canara Bank, Union Bank of India, Bank of India and Bank of Baroda met Finance Ministry official to discuss the pros and cons of consolidation among banks in India.Sources from banking industry, on condition of anonymity, said Union Bank, Bank of Baroda and Punjab National Bank were keen on acquiring Corporation Bank while Canara Bank and Punjab National had shown interest in Dena Bank.Bank of India had expressed interest in Oriental Bank of Commerce. Union Bank and PNB had also shown interest in Andhra...

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Appointment of a Nodal Officer by banksin respect of their Currency Management Operations

The High Level Group on Currency Management chaired by Smt. Usha Thorat, Deputy Governor, Reserve Bank of India submitted its Report in August 2009. The Group, inter alia, emphasized the importance of using modern technology and security systems for stocking, processing and distribution of currency to ensure adequate availability of genuine and clean notes to the members of public.2. With a view to ensure that the banks accord due priority to the above objective, it is proposed that all banks maintaining currency chests shall entrust the responsibility of currency management to a functionary not less than the level of General Manager, who will be the nodal point of contact for Reserve Bank of...

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Banks may park excess funds in short-term debt instruments

Banks are expected to step up investment of their surplus funds in short-term debt instruments such as commercial papers, treasury bills, and government securities with one-two years residual maturity. This is to address the Reserve Bank of India’s concerns over circular movement of liquidity from banks to the liquid schemes of mutual funds (MFs) and vice-versa. The central bank’s apprehension over circular movement of funds stems from the fact that should liquidity start drying up (on the back of improved credit pick-up) banks would redeem their mutual fund investments to shore up their funds position. Faced with redemption pressure, MFs would then resort to heavy borrowing via Clearing Corporation...

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Govt plans system to track corporate fraud

Having failed to detect the Satyam scam, the government has embarked on a new vigilant system to track corporate frauds as part of which it has decided to look into companies whose financials are found to be suspicious. According to an official in the ministry of corporate affairs, the government's new drive would be technology-driven and bank heavily on the MCA21 e-governance programme that is now the main gateway for corporates to file their statutory documents. "This is part of our efforts to have an effective early warning system and the idea is to detect frauds, or any tendency of fraud, early," the official said, adding that pilot work on the project has already been kick started. Giving...

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D.A. Chart for Nov-09,Dec-09 and Jan-2009

D.A. Chart for Nov-09,Dec-09 and Jan-2009 D.A. Chart for Nov-09,Dec-09 and Jan-2009...

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Bank guarantee issue limits

Banks can now issue guarantees to service importers for an amount of up to $5,00,000 or equivalent, following the move by the Reserve Bank of India to increase the limit. In a notification, the RBI increased the limit for issuing bank guarantees from the earlier $1,00,000 or equivalent. Banks are allowed to issue guarantees in favour of a non-resident service provider, on behalf of a resident customer who is a service import...

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Banks prepared to check fake currency menace: RBI

Banks are fully geared to check the menace caused by fake currency, a senior official of the Reserve Bank of India said. Reserve Bank of India Regional Director J Sadakkadulla said a high-level committee headed by RBI Deputy Governor Usha Thorat had recommended installing of note sorting machines (NSMs) in all bank branches in a phased manner and has asked the banks to give a road map to the RBI to achieve this task. He said the number of fake notes in India was just eight pieces per million which is one of the lowest in the world. "The total circulation of the currency in India is 48 billion pieces and the fake currency merely 0.0008 per cent of that," he added. "The market price of the note-sorting...

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Rising rupee a big worry for exporters

Over 10 per cent rise of rupee against the US dollar has become a "big worry" for exporters at a time when they saw arrest in sharp decline in the country's exports amidst a hope of recovery. The dollar is trading at below Rs 47, weakening by over 10 per cent from Rs 52.17 in the first week of March 2009. "The appreciating rupee will have negative effect on exporters, who are already facing lack of orders," Federation of Indian Export Organisations President A Sakthivel said. He said weak dollar results in falling margins for exporters as their rupee realisations drop, which in turn affects their negotiating power with the global buyers. "Appreciating rupee is a big worry ... we were getting...

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Coming soon: Cheque-reading ATMs

Need cash urgently but have already overdrawn from your account? You have a cheque from a client but it is of little use in the dead of night. Lost or misplaced your debit card and need cash to pay the party organiser for your little one's first birthday celebrations? Help is on way, as a couple of banks in India are testing a technology that facilitates instant cheque encashing at ATMs. Used widely across North America and Europe, cheque truncating machines (CTM)—the contraption that make real-time cheque verification and clearance possible—sit inside special ATMs that the world’s largest makers of these machines, like US-based NCR Corp and Diebold Inc, are now hawking to few banks in India....

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RBI says no to full rupee convertibility

The Reserve Bank of India (RBI) today ruled out full rupee convertibility as of now and said the failure of Bharti-MTN deal cannot hasten it. Asked if complete capital account convertibility is possible, RBI Deputy Governor K C Chakrabarty told reporters here: "As of now, no." "Whether it's desirable or not, that we have to examine and whether we have capability", he said. On whether Bharti-MTN deal failure would quicken the process of complete convertibility, Chakrabarty said: "Nothing will quicken the capital account convertibility." While the rupee is fully convertible on the current account, it is not so in capital account. This means that control exists on converting rupee into other currencies...

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Interest rate hikes expected in coming months: Moody's

Central banks in India, China and South Korea are closely monitoring the emerging inflationary pressures on their economies and hikes in interest rates could be expected across the Asia-Pacific region after Australia raised key interest rates, says Moody's economy.com. Australia is the first G20 country to raise interest rates yesterday, with the country's apex bank declaring recession over. The Reserve Bank of AustraliaAsian central banks have intervened in the currency markets in an attempt to slow the slide of the US dollar. Asian countries are worried about their export industries, which would be hurt by a weaker dollar. Central banks in South Korea, Taiwan, the Philippines and Thailand...

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Bounced cheque: No case if borrower hasn't issued it

While accepting a cheque from someone who owes you money, make sure that he himself — or his authorised representative — has signed it. Otherwise, in case the cheque bounces, you won’t be able to file criminal case against the actual borrower, as per a judgement of the Bombay High Court. Viral Filaments, a Mumbai-based company, borrowed certain amount from one Arvind Degvekar sometime in 1997. When the time to return the money came, the company gave him a cheque. The cheque was issued by one Balram, an associate of Viral Filaments and owner of another firm. It bounced, and even after Degvekar informed Viral Filaments about it, he did not get his money back. Degvekar filed criminal case against...

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RBI says no to full rupee convertibility

The Reserve Bank of India (RBI) today ruled out full rupee convertibility as of now and said the failure of Bharti-MTN deal cannot hasten it. Asked if complete capital account convertibility is possible, RBI Deputy Governor K C Chakrabarty told reporters here: "As of now, no." "Whether it's desirable or not, that we have to examine and whether we have capability", he said. On whether Bharti-MTN deal failure would quicken the process of complete convertibility, Chakrabarty said: "Nothing will quicken the capital account convertibility." While the rupee is fully convertible on the current account, it is not so in capital account. This means that control exists on converting rupee into other currencies...

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Banks step in as dollar tumbles

Asian central banks have intervened in the currency markets in an attempt to slow the slide of the US dollar. Asian countries are worried about their export industries, which would be hurt by a weaker dollar. Central banks in South Korea, Taiwan, the Philippines and Thailand have been buying the US currency, traders said. As signs of economic recovery begin to emerge, traders have switched from the traditionally "safe" US dollar to buying other currencies. A fresh wave of dollar-selling may have led to the banks' intervention. The dollar fell to a 14-month low against a basket of currencies on Thursday. Analysts believe that other countries have also intervened. "It was reported earlier this...

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Divestment road map gets PM, Pranab nod

The disinvestment policy and road map prepared by the disinvestment department, which has already received the stamp of approval from the prime minister and the finance minister, will be discussed by the Cabinet Committee on Economic Affairs. “The note floated by the disinvestment department will now go to the Cabinet Committee on Economic Affairs (CCEA). The committee will discuss it this Thursday or the next at the latest before announcing it,” said an official in the department of disinvestment, who requested anonymity as he was not authorised to speak to the media. Addressing newspersons in Delhi in last month, the finance minister had said he was confident that he would be able to persuade...

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Banks wash their hands of faulty e-mail, mobile alerts

Banks may boast of providing 24X7 services through mobile and internet banking, but they have decided not to take the blame for any delay and errors in the mobile or e-mail alerts sent to their customers. Ever since the Reserve Bank of India issued its operating guidelines regarding mobile banking transactions to the banks last year, almost all the banks in the country have started the service, as part of which customers also get alerts on their mobile phones for all important transactions. Similarly, internet banking is also growing by leaps and bounds as it saves cost for the banks and also gives the customers anytime-banking service without going to the bank branches or even ATMs. However,...

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More capital expected for the state-run banks

Fresh capital worth Rs 10,000 crore is expected for the public sector banks. Official sources said that Credit amounting to $2 billion is likely to come by November end and thereafter disbursal to individual banks will start depending on the financial status of each bank at that time.The loans are a part of the World Bank's $14 billion crisis-related lending for India. This will help the country in faster recovery.This credit infusion would ensure credit flow in productive sectors. It aims at enabling banks to maintain a Capital to risk weighted assets ratio (CRAR) of 12 percent in order to sustain economic growth.The finance Ministry have received petitions from various banks regarding a share...

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Rs 10,000-cr of WB fund to flow into banks by December

More than half a dozen PSU banks are expected to get about Rs 10,000 crore as fresh capital by December following the World Bank board's decision to inject funds into these PSBs and enhance their capacity to lend.Loans worth $2 billion is likely to come by the end of November and thereafter disbursal to individual banks would start depending on the financial status of each bank at that time, said official sources.Various banks have requested for capital infusion and the Finance Ministry is examining those request, sources said.Earlier this month, the executive board of the World Bank approved $2 billion loan to enhance banks' capital.The World Bank fund would be utilised to shore up their capital...

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$3-bn World Bank funds for PSU banks

The World Bank is likely to approve by the end of this month a proposal to provide $3 billion (nearly Rs 15,000 crore) to the government to recapitalise public sector banks.While $2 billion from this is expected to be disbursed by December or so, the remaining amount is expected at the end of next year.The government had proposed Rs 18,000 crore to replenish the capital of state-owned banks during the current fiscal year in a bid to boost their balance-sheet muscle in line with international regulatory standards to help them lend more money to companies and individuals.Barring a handful like the State Bank of India and Punjab National Bank, most public sector undertaking (PSU) banks are likely...

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World Bank stimulus: $4.3-bn loan to boost PSBs, IIFCL & Power Grid

The World Bank has approved $4.3 billion loans for India, including a $2-billion fund to recapitalise seven public sector banks. Along with $1.2 billion for India Infrastructure Finance Company Ltd (IIFCL) and $1 billion for the Power Grid Corporation, the loans make up the largest block released by the World Bank to India in one go. A World Bank statement said the ‘banking sector support loan’ will help India maintain the economic stimulus programme by shoring up the capital base of banks, whose capital adequacy ratio has slipped to less than 12%. “A possible second loan, for about $1 billion, is likely to be provided by June 2010,” the statement said. The loan will supplement the government’s...

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Home loans up to Rs 10 lakh get 1% interest rate subsidy

Affordable housing, especially in non-metros, could get a much-needed boost with the Government on Thursday approving the one per cent interest subvention scheme for housing loans up to Rs 10 lakh. The Centre has allocated Rs 1,000 crore for the scheme.Under the new scheme approved by the Cabinet, the interest subsidy will be made available through commercial banks and housing finance companies for construction/purchase of a new house or extension of an existing one. This will be allowed so long as the cost per housing unit does not exceed Rs 20 lakh. The move augurs well for the sector as it comes at a time when there has been a notable slide in the flow of credit to the sector. This was largely...

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RBI not for single market regulator

The Reserve Bank of India has reservations about the unified market regulator approach recommended by the Raghuram Rajan Committee report on Financial Sector Reforms. It wants the current silo approach to the regulation of financial markets to continue for preserving financial stability.Exercise oversight “Unlike equity prices, interest rates and exchange rates are key macroeconomic variables with implications for monetary policy and overall macroeconomic stability. In addition, banks dominate the interest and exchange rate markets. By also being the regulator of these markets, the RBI is in a position to exercise oversight of institutions, markets and products, to monitor market developments……...

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'RBI to exit expansionary stance before others

The easy monetary stance, which has been adopted by the Reserve Bank of India (RBI) since October last year, might be reversed before other economies due to inflationary pressures, Reserve Bank Governor D Subbarao indicated today.“We may have to take the call (to exit) sooner than most other countries. Because as we know inflationary pressures are showing up and we need to be sensitive to them,” Subbarao said at a banking seminar organised by the Federation of Indian Chambers of Commerce and Industry (Ficci) and Indian Banks’ Association.He, however, was candid in admitting that RBI had no clear idea on when to exit the current accommodative policy stance.“The current state of expansionary monetary...

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Uniform retirement age for tribunal chairpersons favoured

The Law Commission has recommended that the Centre fix a uniform retirement age of 70 years for chairpersons of tribunals and 65 years for members against the present limit of 68 for chairpersons and 62 years for members.In its 232nd report, the Commission, headed by Chairman Justice A.R. Lakshmanan, has said: “It needs no mention that an enhanced age of retirement is prescribed in the higher echelons of the administrative and judicial services because the professional experience gained by those working in them needs to be fully tapped for the good of society.”“In the present liberalised economic era, the experience gained by government employees is being fruitfully tapped after their retirement...

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Norms soon to make banks UID-ready

The Unique Identification Authority of India (UIDAI) would draw up standards for banks in the next six months to make them UID-ready. Based on the standards, the banks should put their systems in place by the time the first UID numbers are rolled out in the next 12-18 months, Mr Nandan Nilekani, Chairman, UIDAI, said.“UID and financial inclusion go hand-in hand. It will help banks reduce financial costs while reaching out to the poor,” he said in his address at the FICCI-IBA seminar.Banks will be the enrolling partners and the users of the authentication service, he said.The UIDAI has initiated talks with the Indian Banks’ Association, the RBI, SEBI, IRDA, LIC, TRAI and PFRDA to get their feedback.DatabaseUIDAI...

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RBI Deputy Governor’s term extended by two years

The RBI Deputy Governor, Ms Shyamala Gopinath, has been given a two-year extension till June 20, 2011. She was appointed as Deputy Governor in 2004 for five years, and her term was to expire this year.Ms Gopinath handles, among others, the Internal Debt Management Department, the Foreign Exchange Department, the Department of Non-Banking Supervision, the Department of External Investments and the Operations and Financial Markets Departme...

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RBI to introduce 100 crore Rs 10 plastic note

Soiled notes may soon be a thing of past with the Reserve Bank planning to introduce Rs 10 polymer banknotes whose life span would be 4times the normal currency notes and would be difficult to imitate.The apex bank has initially decided to introduce 100 crore pieces of Rs 10 polymer notes, for which it has floated a global tender, a senior central bank official said.Explaining the rationale for introduction of polymer notes, the official said, these notes would have an average life span of 5 years compared to one year for the currency notes.Besides, the official said, these notes are cleaner than paper notes and it would be difficult to counterfeit the currency.The polymer notes were first introduced...

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High capital base needed for banks with PE arm: RBI

Soon banks such as ICICI Bank, Axis Bank and State Bank of India with a private equity (PE) arms may have to keep enhanced capital base to mitigate risks arising from such exposures.The private equity business of banks involve reputational risk as people putting money (into private fund) look at credentials of those banks.“So you have to recognise that this requires some capital. So some capital need to be provided for that,” RBI Deputy Governor Usha Thorat told reporters on the sidelines of the Ficci-IBA Banking Summit here today.It meant banks would have to maintain additional capital if they were sponsoring and floating private equity funds, she added. She said that RBI would shortly be issuing...

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RBI frowns on sub-PLR loans, bankers resist

The Reserve Bank of India (RBI) is against lending by banks below their benchmark prime lending rates (BPLRs) — a stance that has met with stiff opposition from bankers.The central bank’s committee on BPLR review, which met last week, was of the view that the practice of lending below BPLR needed to be discouraged in order to make pricing of risk more transparent.According to a banker who attended the meeting of the panel, which is headed by RBI Executive Director Deepak Mohanty, the central bank was of the view that core deposits of the banks should not be used for lending below the prime lending rate.About three quarters of the bank lending happened at sub-BPL rates, while core deposits constituted...

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Banks step back as you draw out!

Banks are not geared up for such a steep rise in volumes.Confess! Haven’t you all been going to bank ATMs regularly during the past few months? The sharp rise in the number of transactions at ATMs in the country seems to prove it.You probably wanted to check out if it was really true that you could draw your money from any ATM. And barring an occasional hiccup, you got the money. And you were able to check out your bank balance on a daily basis – following up every credit that came into your account and carefully monitoring the debit of every amount from the account. Just admit it.Data from the National Payments Corporation show that the number of balance enquiries at the ATMs went up 14 fold...

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Farm growth expectation unchanged: RBI

Despite the country experiencing deficient rainfall, the Reserve Bank of India (RBI) has not changed its growth projections for the agricultural sector in the current financial year.It expects the farm sector to grow at 4 per cent in 2009-10.“It (farm growth expectation) was given in the month of July. It will be again given in October. Till October, we are not going to change the number,” KC Chakrabarty, deputy governor of RBI, told at the sidelines of a seminar on Monday.He, however, said drought would always be a concern. He highlighted the need for relocation of surplus agricultural labour to other sectors for sustaining economic growth. When asked if extension of repayment under farm loan...

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RBI to ensure regular supply of fresh bank notes

Besides examining options to enhance the life of bank notes, the Reserve Bank of India has initiated a multi pronged approach involving regular supply of fresh bank notes, speedier disposal of soiled bank notes and extended mechanisation of cash processing activity to ensure that good quality bank notes are in circulation in the system. The Bank has in its Annual Report stated that during 2008-09, the value of bank notes increased by 17.1 per cent and by 10.7 per cent in volume terms. The total supply of bank notes by the Bharatiya Reserve Bank Note Mudran (P) Ltd during 2008-09 (July-June) was 8,501 million pieces as compared with 8,488 million pieces during 2007-08.The Government-owned Security...

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Govt extends agri debt relief scheme

The government has extended the debt relief scheme for farmers with land holdings in excess of 5 acres by six months till December. It has also given banks the discretion to make payments out of provisions set aside for such loans in case the farmer is unable to repay three-fourth of the loan amount as stipulated by the scheme, according to a Reserve Bank of India circular on Monday. The remaining 25% of the loan will continue to be provided by government under the compromise package to banks. According to MV Nair, chairman, Indian Banks’ Association, and chairman, Union Bank of India, the move will enable banks to speedily settle farm loans and reduce non-performing assets from bank balance...

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SC bench to decide on insurers' liability to pay claims

A larger bench of the Supreme Court will decide the issue of whether insurance companies can be compelled to pay the claim even if theyare under no liability to pay such amount? A bench comprising Justice Markandey Katju and Justice AK Ganguly said: “We are of the opinion if the insurance company proves that it has no liability to pay compensation to the claimants, the insurance company cannot be compelled to make payment and later on recover it from the owner of the vehicle.” No doubt, there are some decisions of the apex court which have taken the view that even if the insurance company has no liability, yet it must pay and later on recover it from the owner of the vehicle, the court said....

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Hedging loans with interest rate futures

Interest rate futures (IRFs), which made a comeback this Monday after six years, has opened up a lot of interesting options for an individual.Especially, for high networth individuals (HNIs), IRFs could be a good hedge against loans or existing fixed deposits. Here’s how it will work:Say, a person has taken a home loan of Rs 40 lakh at 8 per cent floating rate for 15 years. His equated monthly instalment (EMI) would be Rs 38,226.FUTURE PERFECTHome loan = Rs 40 lakhRate of interest = 8 per centTenure = 15 years (180 months)EMI = Rs 38,226After one yearRate of interest = 10 per centPrincipal outstanding = Rs 39,77,919Tenure = 14 (168 months)New EMI = Rs 44,083(increase = Rs 5,857)Hedging through...

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DICGC settles claims worth Rs 195 cr from co-op banks

The Deposit Insurance andCredit Guarantee Corporation (DICGC) has settled depositor claims aggregating Rs 195 crore from 28 liquidated co-operative banks, mainly from Karnataka and Maharashtra, in FY2009. This is against Rs 155 crore from 22 co-operative banks in FY2008.The Corporation’s settlement figures highlight the fact that the number of co-operative banks whose licence has been cancelled by the banking regulator is steadily increasing. The regulator, in recent times, has come down heavily on some of these banks for mismanagement of operations, connected lending, failure to meet prudential norms and so on.In the current financial year, so far, the Corporation has settled depositor claims...

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Bankers wary of collateral-free education loan scheme

When a bank extends an education loan it takes a call on the course and the prospect of the student-borrower getting a job on completion of the course.—Collateral-free education loans given by banks under the ‘model education loan scheme for students to pursue higher studies’ has bankers a bit worried.Their concern stems from two counts. While on the one hand they do not have any tangible security to fall back on should an education loan of up to Rs 4 lakh turn sour, on the other, in the current scenario of a slowing economy whereby either jobs are hard to come by or even if a student lands one, he/she is not in a position to service the loan due to low pay. Hence, they are cautious of potential...

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Indian banks pass stress test

MTM risks to the Indian banking sector are limited and manageable.The Indian banking system is resilient to the shocks that may arise due to higher non-performing assets (NPAs) and the global economic crisis, the Reserve Bank of India’s (RBI’s) stress test has shown.RBI’s Annual Report-2008-09 said the test was done to assess the capital adequacy of the banks to sustain losses from deteriorating asset quality, primarily due to falling external demand in the wake of the global recession a subsequent slowing of domestic private demand.A similar test was done to assess the risks associated with the mark-to-market (MTM) losses on the banks’ overseas exposure. MTM means stating losses based on the...

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Chit funds can't take public deposits, says RBI

The Reserve Bank of India (RBI) today prohibited chit funds from accepting deposits, a move that could make banks the sole public deposit-taking institutions in the country.The apex bank said these funds could accept deposits only from their shareholders. Chit funds are dually regulated by state government and the RBI. They are registered with the registrar of chit funds under state governments and are regulated by RBI if they accept public deposits.RBI regulates them through the Miscellaneous Non-Banking Companies (Reserve Bank) Directions Act. Now, the Act has been amended to ban them from accepting public deposi...

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Free ATM withdrawals face caps from Oct 15

From October 15, customers will not be able to enjoy limitless use of third-party ATMs free of charge.The Indian Banks’ Association (IBA) today decided to limit the number of free third-party ATM transactions to five per month. In addition, the maximum amount that a customer can withdraw from another bank’s ATM has been capped at Rs 10,000 per transaction. Banks have also been allowed to charge for withdrawals from current accounts at third-party ATMs.The decision to bring the rule into force from October 15 was taken at a meeting of the IBA in Mumbai today. IBA Chairman M V Nair confirmed the date on which the rule would come into effect. Customers will have to be intimated at least a month...

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RBI group suggests survey on consumer confidence

Data pertaining to areas such as consumer confidence, business outlook for services and employment may soon be available. The Reserve Bank of India’s Working Group on Surveys has recommended these as some of the topics on which the RBI should bring out surveys.Explaining the need for a consumer confidence survey, the group, in its report, said that changes in household confidence, personal financial situation, savings and investment intention have an impact on real activities and are, therefore, of particular relevance for policy purpose.Similarly, a regular survey of the credit market conditions would help the RBI analyse trends and developments in credit growth. Such a survey can cover the...

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MAT changes will hit NBFCs

The Direct Taxes Code (DTC) is slowly being put to deeper scrutiny. As is always the case, some of the changes may be ushered in with good intention, but inept drafting leaves the door open for needless litigation.The newly crafted Minimum Alternate Tax (MAT) is a case in point. Ever since Rajiv Gandhi unleashed the book profits tax on India Inc. in 1987, it has generated controversies galore and kept all the courts busy interpreting the intention and scope of the provision.At present, MAT is applicable to corporates at 15 per cent on published profits. The nominal tax rate for the corporate sector is 33.99 per cent and the effective rate after all deductions/concessions stands at around 22.22...

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RBI surplus jumps 66.6 per cent

The Reserve Bank of India’s (RBI’s) transferable surplus to the Government of India for 2008-09 jumped 66.6 per cent to Rs 25,009 crore from Rs 15,011 crore in the previous year.According to the RBI Annual Report, the surplus has come primarily due to increased earnings from domestic investments.The income from domestic sources in 2008-09 at Rs 9,935.77 crore was higher compared with the last year’s level of Rs 5,867.52 crore, primarily on account of an increase in ‘Interest on Domestic Securities and LAF operations,’ which increased from Rs 4,533.87 crore in 2007-08 to Rs 8,683.11 crore in 2008-09 and ‘Interest on Loans and Advances,’ which increased from Rs 325.60 crore in 2007-08 to Rs 1,254.80...

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Sharp rise in State Govts’ borrowing costs

The State Governments’ borrowing costs have seen a sharp escalation despite the liquidity overhang in the financial markets.The sharp increase in costs was evident from the last auctions for the State development loans held on August 25. The loans were placed at an average yield of 8.22 per cent or a little over 100 basis points over the sovereign ten-year yield bonds. State development loans are normally placed for tenures of 10 years. The spreads have progressively increased since the beginning of this financial year. At the April auctions, the spreads were barely 75 basis points.Increase in demandThe Chief Economist of rating agency Credit Analysis & Research Ltd, Dr Soumendra K. Dash,...

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RBI to ensure regular supply of fresh bank notes

Besides examining options to enhance the life of bank notes, the Reserve Bank of India has initiated a multi pronged approach involving regular supply of fresh bank notes, speedier disposal of soiled bank notes and extended mechanisation of cash processing activity to ensure that good quality bank notes are in circulation in the system.The Bank has in its Annual Report stated that during 2008-09, the value of bank notes increased by 17.1 per cent and by 10.7 per cent in volume terms.The total supply of bank notes by the Bharatiya Reserve Bank Note Mudran (P) Ltd during 2008-09 (July-June) was 8,501 million pieces as compared with 8,488 million pieces during 2007-08.The Government-owned Security...

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Forex reserves rise by $932 million

After declining for two consecutive weeks, the country’s foreign exchange reserves increased by $932 million to touch $271.957 billion for the week ended August 21, according to the Reserve Bank of India’s Weekly Statistical Supplement.In the earlier week, foreign exchange reserves fell by $214 million to $271.025 billion.The increase in reserves was on account of currency revaluation, as the dollar appreciated against major currencies during the week, said a dealer with a public sector bank.The foreign currency assets increased by $928 million to touch $260.938 billion. Foreign currency assets expressed in US dollar terms include the effect of appreciation/depreciation of non-US currencies...

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Rupee gains tracking equities

The rupee gained on Friday against the dollar tracking the surprise gains made by the domestic equity markets, said forex dealers. The rupee opened higher at 48.83 and closed at 48.65, which was also the day’s high. On Thursday, the rupee had closed at 48.91/92 and had also crossed 49 briefly. There was regular dollar inflow during the day as foreign banks were seen selling dollars on behalf of their foreign institutional investor clients, said a forex dealer with a public sector bank. FIIs were net buyers in the equity markets. “In the whole month, the rupee weakened only due to month-end demand. The rupee is now tracking the equity markets which are stronger compared with other Asian markets,”...

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