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 importer.

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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 machine is Rs 10 lakh and will decrease in the near future,' said Sadakkadulla. He said earlier, it was only the currency chest of the banks which were required to install note sorting machines. "But now each branch of the bank will have to go for note-sorting machines," he asserted. At present, only about 4,000 currency chests have these machines and about 70,000 bank branches that are present all over the country require them.

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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 help from strong dollar," Chairman of Council for Leather Exports Habib Hussain said. Though dollar has seen a sharp decline against major currencies of the world, bulk of India's trade is done through the US currency. Exports have been declining since October 2008 under the impact of recession in the world's major economies. However, the contraction in exports, which dipped by 30 per cent in March and April, reduced to 19.4 per cent in August this year.

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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. Governmentowned State Bank of India, the country’s largest lender, IDBI and ING Vysya are a few banks that have evinced interest in such ATMs. Banking regulator RBI too has welcomed the move, saying it will be good for customers. Pradeep Sen, MD, NCR India says that the company has been showcasing its CTM-ATMs to banks in India since last month. “We will also be launching new ATM machines, in which you can just insert a bundle of notes of any denomination. The ATMs will read the notes, and credit the amount in your account instantly,” he says. Currently, one has to put cash inside an envelope to deposit inside ATM. It gets credited in about 24 hours. There are over 48,000 ATMs in the country, split between three big makers––NCR , Diebold and Germanybased Wincor Nixdorf.

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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 when there is movement of capital from one country to India and vice versa. The Tarapore Committee as well as other experts have recommended full convertibility of the Rupee in a phased manner. Last week, the $23 billion Bharti-MTN deal was called off after regulatory hurdles in the way of dual listing could not be removed. One of the hurdles was that India does not have full rupee convertibility. Chakrabarty also indicated that RBI is considering plea of banks for a hike in a limit for bonds that can be held till maturity. Initially, he said the issue did not come under his purview but later, when asked if RBI favoured raising the Held-To-Maturity cap, added: "They (RBI) were considering it. My knowledge is that they were considering it." Asked if RBI proposed to revise its expectation on inflation, he said the policy statement would be released (by RBI Governor) on October 27. "We don't predict about inflation everyday. 27th October, it will be known."

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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 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 morning that Russia was one of at least six central banks buying dollars," said Michael Woolfolk, senior currency strategist at the Bank of New York Mellon.

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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 both Balram and Viral Filaments under Section 138 of the Negotiable Instruments Act. Viral Filaments then moved the high court, seeking to quash the complaint. In the order last week, Justice R Kingaonkar noted that the company itself had not issued the cheque, though it owed the money. Under the provisions of Section 138, "action could be initiated against the drawer of the cheque", Justice Kingaonkar observed, quashing the case against Viral. However, Degaonkar was free to file a civil suit against the company, the judge added.

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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 when there is movement of capital from one country to India and vice versa. The Tarapore Committee as well as other experts have recommended full convertibility of the Rupee in a phased manner. Last week, the $23 billion Bharti-MTN deal was called off after regulatory hurdles in the way of dual listing could not be removed. One of the hurdles was that India does not have full rupee convertibility. Chakrabarty also indicated that RBI is considering plea of banks for a hike in a limit for bonds that can be held till maturity. Initially, he said the issue did not come under his purview but later, when asked if RBI favoured raising the Held-To-Maturity cap, added: "They (RBI) were considering it. My knowledge is that they were considering it." Asked if RBI proposed to revise its expectation on inflation, he said the policy statement would be released (by RBI Governor) on October 27. "We don't predict about inflation everyday. 27th October, it will be known."

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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 morning that Russia was one of at least six central banks buying dollars," said Michael Woolfolk, senior currency strategist at the Bank of New York Mellon.

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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 the naysayers among allies to give up their traditional stance on disinvestment. “I’ve handled the coalition members for so many years. I’ll handle this issue. I’ll manage them (the coalition partners) just as I’ve done in the past,” he said in response to specific queries on whether the government would be able to get its disinvestment programme back on track in the face of stiff opposition from allies such as Trinamool and DMK. Sidhartha Pradhan, joint secretary at the department of disinvestment, told the media in Mumbai last week that the government is looking to offload stake in at least five state-run companies during the rest of the year.

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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, banks have now decided that the liability does not lie with them if the customers do not get the mobile or e-mail alerts on time, or if the alerts contain errors and lack accuracy, as they believe it could be due to fault at the end of the mobile, internet and third-party service providers. According to new credit card terms and conditions, being effected by the country’s largest private sector lender ICICI Bank from October 5, the bank would not be liable for “non-delivery or delayed delivery of alerts, error, loss or distortion in transmission of alerts to the cardholders’’ . Similar terms are being implemented by many other banks as well, while some others have already such clauses in place. “The cardholder acknowledges that the provision of the facility of receiving alerts on mobile phone number of e-mail provided by the cardholder while applying for the credit card facility , is dependent on the infrastructure , connectivity and service providers engaged by ICICI Bank or otherwise,’’ the new clause says.

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