Gold imports drop 30% to $20 bn in Apr-Sept

http://www.financialexpress.com/news/gold-imports-drop-30-to-20-bn-in-aprsept/1038531/0

Gold imports in value terms declined by 30.3 per cent in the April-September period of this year to USD 20.2 billion, Parliament was informed today.

During the April-September period of 2011, the gold imports had increased by 66 per cent to USD 29 billion.

"Decline may have occurred due to increase in customs duty on gold imports by government in January and March 2012," Minister of State for Finance Namo Narain Meena said in a written reply in the Lok Sabha.

For the entire 2011-12 fiscal, gold imports stood at USD 56.2 billion. "It may be noted that the international gold prices have also increased significantly in recent years. Such behaviour of gold prices assumes importance for building up of positive expectations of gold investors and hence might have partly contributed to the increase in gold imports in India," Meena said.

During April-September period of 2012-13, the value of gold imported by Government and public sector stood at Rs 18,026 crore and that of private sector is Rs 92,501 crore, Meena added.

In his Budget proposal, the then Finance Minister Pranab Mukherjee had doubled the basic customs duty on standard gold bars to four per cent and on non-standard gold to 10 per cent. He also imposed one per cent excise duty on unbranded jewellery.

A foreign bank threatened to close New India Assurance a/c over Iran issue

http://www.thehindubusinessline.com/industry-and-economy/banking/a-foreign-bank-threatened-to-close-new-india-assurance-ac-over-iran-issue/article4146373.ece

The Government today said a foreign bank had threatened to close down the account of state-owned New India Assurance Ltd if it did not stop providing insurance cover to ships ferrying oil from Iran.

However, the threat was not executed by the foreign bank, Minister of State for Finance Namo Narain Meena said in a written reply in the Rajya Sabha.

“The public sector general insurance companies have not received any such threat except the New India Assurance Co Ltd to whom one foreign bank had threatened to close its account on this issue. However, this bank has now agreed to continue the account,” Meena said.

The Minister further said that there was no deactivation of account of state-run insurers by foreign banks.

He was responding to a query whether several foreign banks had threatened to close the accounts of state-run general insurers if they continue to provide insurance cover to Indian ships ferrying oil from Iran.

Insurance regulator IRDA, Meena said, had informed the government that following the restrictions imposed by the United Nations and the European Union, Europe-based insurers had stopped providing cover to ship owners involved in carriage of cargo or oil consignments from Iran-India-Iran and vice-versa.

Fraudsters turn cloning HDFC credit cards into a business

http://www.indianexpress.com/news/fraudsters-turn-cloning-hdfc-credit-cards-into-a-business/1037453/

Four persons were arrested in New Delhi for allegedly cloning credit cards and then conducting large transactions leading to a large number of bank customers losing a lot of money, police said today.

The arrested have been identified as Dheeraj Khanna, Pankaj Deewan, Yogesh Mahajan and Mohd. Yasin. Three others Kamal, Rahul and Devender Chauhan are yet to be arrested.

The four landed in police net following investigations into a complaint filed by an HDFC official who found transactions of huge amount through credit card swiping through machines installed in some shops.

"Domestic cards were cloned by Kamal and international cards by Devender Chauhan of Agra with the help of a professional hacker. The data of genuine customers was stolen through the skimmer (an instrument used to copy the data of a card) and then copied on a plain card having magnetic strip," police said.

The bank had provided six credit card swiping machines to one Rahul, later identified as Khanna, for his jewellery shop.

"The bank later witnessed highly suspicious transaction pattern on international and domestic cards amounting to Rs 9.75 lakh.

"During further review of transactions and the visits carried out by bank officials to collect the charge slips and other supporting documents, it was found that the merchant no longer existed at the said address furnished to the bank," police said.

A case was then registered.

Khanna was first arrested and later the other three, who allegedly helped him swipe the cards.

"Khanna used to get 40 per cent of the total amount swiped on his machines. Cloned cards were arranged by Pankaj, Yogesh and Yasin through their contacts. They destroyed the EDC machines and cheque books when the bank tried to contact them," police said.

Fund managers' fee structure revamp to boost NPS offtake: PFRDA Chairman

http://www.thehindubusinessline.com/industry-and-economy/banking/fund-managers-fee-structure-revamp-to-boost-nps-offtake-pfrda-chairman/article4139915.ece

The pension fund regulator PFRDA sees greater offtake of the new pension system (NPS) on the back of its move to revamp the fee structure of pension fund managers.

The Pension Fund Regulatory and Development Authority (PFRDA) has fixed a fee ceiling of 0.25 per cent for pension fund managers.

This is higher than the earlier fee level of 0.0009 per cent, which was considered inadequate and a loss-making proposition for fund managers.

NPS had been designed to harness the existing distribution channels of banking, insurance and capital markets.

But the experience so far has been that NPS has not been able to take advantage of the existing distribution network due mainly to differences in the compensation structure for the distributors.

“I agree that the NPS is not popular in the private sector, where it is voluntary. We now trust that with the revamp of the fee structure and other measures taken by us, we will see greater offtake through these channels,” Yogesh Agarwal, PFRDA Chairman, said on the sidelines of an Assocham event here.

HSBC secret accounts: I-T Dept to begin prosecution action

http://www.thehindubusinessline.com/industry-and-economy/banking/hsbc-secret-accounts-it-dept-to-begin-prosecution-action/article4143190.ece

The Income-Tax Department has decided to begin prosecution action against those having “substantial” amounts in their bank accounts in HSBC’s Geneva branch.

The Department has now written to the Finance Ministry to suggest a benchmark for funds held on the basis of which the I-T department can initiate legal action for tax evasion and tax theft.

Top sources said a benchmark of about Rs 5 crore is being mulled for initiating court proceedings against those Indians whose names have figured on the secret list of HSBC Geneva, supplied to India by the French government.

All others below the benchmark amount, the sources said, could be penalised under I-T laws and the amount can be realised from them by way of raising a comprehensive tax demand.

The sources said a number of individuals or entities who have figured in these accounts, also searched and probed by the I-T department, held small balances ranging from few thousands to lakhs of rupees and, hence, a policy has to be made as to how many will be prosecuted and how many penalised under tax theft laws.

“A policy framework will be decided and action would be taken on a case-to-case basis,” the sources said.

The I-T department, through the Finance Ministry, has already approached Swiss revenue authorities for banking data of certain individuals after investigations showed some of them reportedly had other accounts under fictitious names.

The department has already begun a country-wide I-T assessment of those entities whose names have figured in these secret lists.

India had obtained data of over 700 HSBC accounts from French government channels last year.

A good article on CRR and SLR

http://www.thehindubusinessline.com/industry-and-economy/banking/a-case-for-paying-interest-on-crr-balances/article4133686.ece

It is generally believed that both the cash reserve ratio (CRR) and the statutory liquidity ratio (SLR) are monetary tools in the hands of Reserve Bank of India. SLR, in fact, is not a tool to regulate the liquidity in the system.

SLR investments are made in government bonds, which will come back to the system as and when the government spends the money mobilised through issuing bonds. Therefore, only CRR serves as a monetary tool in the hands of RBI by moderating the money multiplier effect.

SLR is primarily aimed at restricting the expansion of bank credit as also to ensure solvency of banks.

RAGING DEBATE

In banking circles, whether interest should be paid on CRR balances has been raging for long. Those against paying interest argue that the purpose of CRR is to reduce the money supply or liquidity in the system and payment of interest would reduce the efficacy of CRR.

It is argued that the incremental CRR balance kept with the RBI during a year due to increase in deposits can be taken back as interest on CRR.

Interest on CRR itself can be used as a monetary tool to effectively regulate the money supply in the system.

At present, the RBI increases the CRR to suck out the excess liquidity in the system. By paying attractive interest on the entire balance kept with the RBI, including the excess CRR balance, the apex bank can ensure that the funds are transferred to itself and, thereby, reduce the liquidity in the system.

In the current situation, if 8-9 per cent interest is paid on the balance kept with the RBI, banks will most likely rush to keep funds with central bank and that will reduce the liquidity in the system.

It may be noted that banks maintain 6-7 percentage points more SLR than the required 23 per cent when the risk-free return on SLR securities is 8-9 per cent. Therefore, it can be safely assumed that if 8-9 per cent interest is paid liquidity will automatically flow from the system to the RBI. The liquidity impounded will be 10-12 times the interest paid.

Similarly, when the system requires more liquidity, the interest paid on the balances kept with RBI may be reduced which will compel the banks to draw the funds from their accounts with the RBI and use for advances or investment.

This way, a variable nature of interest on CRR can be used as a monetary tool even while compensating the banks for the cost of funds incurred on the balance kept with RBI.

IMPLICIT TAX

There may be objection as to why the RBI should pay interest on the balances kept with it when it is not earning anything out of those funds. The answer is that payment of interest is the cost of sucking excess liquidity which is harmful to the economy.

If liquidity is sucked through CRR and no interest is paid on it, this would amount to an implicit tax with the public bearing the cost of regulating liquidity in the system. In any case, there is a cost involved in monetary control. If no interest is paid on CRR, the cost is borne by the public in the form of implicit tax. If interest is paid on CRR, the cost is to be borne by the central bank or the Central Government.

It may be noted that when foreign exchange inflows are more, liquidity in the system increases due to purchase of foreign exchange. And in order to suck the resultant excess liquidity, the RBI pays interest under the Market Stabilization Scheme (MSS). Recently, even the Finance Ministry expressed its openness to paying interest on CRR.

Besides, the RBI often uses open market operations (OMO) to regulate the money supply. Through OMO, the RBI can either inject (open market purchases) or suck (open market sale) liquidity.

Open market purchases will achieve the same effect of increasing the liquidity in the system as the reduction in CRR does. Similarly, by resorting to open market sale of securities which were purchased by the RBI due to devolvement or otherwise, the liquidity in the system can be reduced without increasing the CRR.

Both open market purchase and sale of securities involve interest element attached to the respective securities.

To illustrate, when liquidity is reduced by selling securities through open market operations, the banks and other market participants that purchased the securities from RBI will start getting periodical interest on the securities and, to that extent, the RBI will get lesser interest on securities.

Similarly, when liquidity is injected into the system by resorting to open market purchases, the future interest on those securities will be received by the RBI only and to that extent RBI will get more interest on securities. In spite of the interest effect, the RBI is often resorting to open market operations to supplement use of CRR as a monetary tool.

ON EXCESS BALANCES TOO

On the same logic of paying interest while using other monetary tools such as OMO and MSS, the RBI may pay interest on CRR balances too. In fact, the RBI would do well to pay interest not only on the statutory CRR balances but also on the excess balances.

Banks also can keep the surplus funds with the RBI at the reverse repo rate of 7 per cent. However, this cannot happen infinitely as it involves transfer of securities from the RBI to banks. The securities so transferred serve no purpose as they are not considered for SLR.

Therefore, the RBI may very well accept excess CRR balances and pay interest.

Interest on reserves should be used as a monetary tool and when liquidity is required to be increased, the rate on reserves need to be reduced to such a level that it becomes a disincentive to keep balance with the central bank.

Muthoot Finance applies for white label ATM licence

http://www.business-standard.com/india/news/muthoot-finance-applies-for-white-label-atm-licence/493753/

Gold loan non-banking financial company (NBFC) Muthoot Finance is planning to enter the white label ATMs (WLAs) space to consolidate its presence in financial services. It has applied to the Reserve Bank of India for this.

White label ATMs are the ones owned and operated by non-banking entities. According to the current policy, only banks can establish and operate the ATMs.

Earlier this year, the central bank had decided to allow non-banks, whose net worth is at least Rs 100 crore, to set up and operate ATMs to increase the per capita availability and also increase their penetration in tier-III to tier-VI towns and villages.

In June, RBI had issued the detailed guidelines for WLAs.

RBI had proposed three schemes for companies which wished to apply for WLAs. In the first (Scheme A), a company has to set up at least 1,000 WLAs in the first year. In the second year, it should at least double the number of WLAs it set up in the first year. In the third year, the company is required to set up at least three times the WLAs it installed in the second year.

For every three WLAs installed in tier III-VI centres, a company can install one WLA in a tier-I or tier-II centre.

Muthoot has applied for the WLA licence under Scheme A.

RBI considering four alternatives to gold

http://www.thehindubusinessline.com/industry-and-economy/banking/rbi-considering-four-alternatives-to-gold/article4133691.ece

Given Indians’ yen for gold and the pressure on the current account due to its import, the Reserve Bank of India is considering introducing four gold-related instruments to ease the physical demand for the yellow metal.

The instruments are modified gold-deposit scheme (GDS), gold-linked account, gold-accumulation plan, and gold-pension plan, said RBI Deputy Governor Subir Gokarn at the Bankers Conference in Pune.

Under the modified GDS, which will be suitable for mid-size investors, physical gold is deposited with banks for a definite period and interest will be paid in the form of ‘gold’ after maturity.

However, gold will not be returned in the original form.

The gold-linked account will be a non-interest bearing account wherein gold will be purchased and kept abroad.

The yellow metal will be hedged abroad and physical delivery of the metal will not arise.

At the end of the maturity period, the customer disposes of the gold and gets equivalent of cash. This account will allow easy entry and exit.

The gold-accumulation plan will be like the systematic investment plan offered by mutual funds, that is, buy gold in small quantities at regular intervals.

Though the returns could fluctuate, over time the average cost of accumulation goes down. Physical delivery is quite low.

The gold-pension plan will be like reverse mortgage of property — where a homeowner can borrow money against the value of his home, and no repayment of the mortgage is required until the borrower dies or the home is sold.

Targeted at senior citizens, banks will open an annuity plan with insurance companies for a definite period. Though banks will not return the jewellery, the high return is expected to attract the gold owners, said Gokarn.

Govt to launch direct cash subsidy transfer from Jan 1

http://businesstoday.intoday.in/story/govt-to-launch-direct-cash-subsidy-transfer-from-jan-1/1/190113.html

Government will launch the payout of direct cash subsidy to people through the Aadhaar based system in 51 districts of the country from January 1, Finance Minister P Chidambaram said on Saturday.

He said the government intends to complete roll out of the direct cash transfer through the Aadhaar system in the entire country by the end of 2013.

This will, among other things, facilitate the pay out of direct cash subsidies to the targeted beneficiaries.

"We want the roll out (of Aadhaar-based subsidy transfer) to be completed by the end of 2013," he said at the Bancon conference.

The Finance Minister noted that the government spends "thousands and thousands of crores of rupees" on pension and various subsidies.

"We are going to launch the ambitious programme of payout of direct cash subsidy to people through the Aadhaar system in 51 districts across 15 states", he said.

Chidambaram said Prime Minister Manmohan Singh will take a meeting of the cash transfer committee on Monday in the run up to the implementation of the scheme from the beginning of next year.

Stating that the economy is in a slowdown mode, he said the economic growth is expected to be 5.5 per cent in the second quarter.

"For us 8 per cent growth is not an aspiration. We must aspire for over 8 per cent growth", he said.

Two-thirds of bank deposits have no insurance cover

http://www.thehindubusinessline.com/industry-and-economy/banking/twothirds-of-bank-deposits-have-no-insurance-cover/article4130682.ece

Bank deposits of Rs 38 lakh crore, accounting for 67 per cent of the total deposits, do not have cover from the Deposit Insurance and Credit Guarantee Corporation (DICGC) as of September 2011.

The figure was Rs 32 lakh crore a year ago. This is based on data from the Reserve Bank of India.

The falling insurance cover is due to the rising proportion of high-value deposits. Bank depositors enjoy insurance cover on deposits up to Rs 1 lakh. This means that if a bank goes belly up, each account will still recover up to Rs 1 lakh from the Corporation.

Some experts feel that the situation calls for a revision in the insurance cover offered. The insurance limit of Rs 1 lakh per account was set way back in 1993. With inflation averaging 6.5 per cent in the last two decades, a Rs 1 lakh deposit then would equal Rs 3.3 lakh at today’s prices.

SMALL INVESTORS

Bankers, however, counter that this may not pose much of a risk to small investors, as most are likely to have deposits of less than Rs 1 lakh. In fact, banks have deposit accounts (savings and time deposits) numbering 107 crore. Of these, 99.6 crore deposit accounts, or 93 per cent, have less than Rs 1 lakh as balance.

The DICGC’s deposit insurance fund, which is supposed to meet these liabilities, had a Rs 30,000-crore balance by March 2012. While it added Rs 5,300 crore by way of inflows for the year, it met demands of Rs 287 crore towards insurance claims. This fund’s balances amount to 1.6 per cent of the underlying deposits insured.

Regional Rural Banks have the highest proportion of insured deposits at 74 per cent followed by co-operative banks with 62 per cent of the deposit value insured. Commercial banks, on the other hand, have only 30 per cent of the deposit value insured.

SBI TOPS

State Bank of India and its associate banks have 35 per cent of their deposits insured (in terms of value) making it highest among the commercial banking group. Private banks and foreign banks, on the other hand, have 23 per cent and 8.4 per cent, respectively, of their deposits insured because of a larger proportion of high-value deposits on their books.

The average deposit per account as of September 2011 has risen to Rs 53,000 per account up from Rs 7,700 when the Corporation increased the limit to Rs 1 lakh in 1993.

Among individual accounts, while public sector banks’ depositors have around Rs 40,000 per account, private banks have deposit per account in excess of Rs 51,000. Foreign banks’ deposit per account is more than Rs 2 lakh.

We’re yet to hear from Kingfisher: SBI chief

http://www.thehindubusinessline.com/industry-and-economy/banking/were-yet-to-hear-from-kingfisher-sbi-chief/article4130354.ece

With barely a week left ahead of the November 30 deadline set by bankers to pump in fresh capital into the grounded Kingfisher Airlines, State Bank of India (SBI) today said it has not heard from the company so far.

“Kingfisher as a company has not given us any information or visibility on capital infusion,” SBI chairman Pratip Chaudhuri told reporters on the sidelines of the annual two-day banking summit `Bancon 2012’ here.

In an obvious reference to the United Spirit—Diageo deal earlier this month, he said there are reports relating to the group company, but that cannot be a basis for taking a view on the airline.

Late last month, SBI set a November 30 deadline for Kingfisher to bring in fresh capital and produce a comprehensive revival plan.

But the airline chairman Vijay Mallya said later that he had no knowledge about any such deadline.

On the day United Spirits sold majority stake to the English liquor major Diageo for over Rs 11,100 crore, Mallya had hinted that the proceeds would not be diverted to the troubled airline, saying “both businesses will be dealt with separately“.

The SBI chairman had earlier this week categorically ruled out fresh funds to the airline, which has not been servicing its Rs 7,000-crore working capital and long-term loans taken from 17 banks since January this year.

Banks have been demanding that Kingfisher management pump in at least $1 billion of fresh equity.

Amendments to insurance Bill may be introduced in current session of Parliament

http://www.thehindubusinessline.com/industry-and-economy/banking/amendments-to-insurance-bill-may-be-introduced-in-current-session-of-parliament/article4126520.ece

The Government is likely to introduce amendments to the Insurance Bill in the current session for raising FDI cap in private sector insurance companies to 49 per cent, Parliament was informed today.

“...the official amendments to the (Insurance) Bill are likely to be introduced in the current session of Parliament.

The foreign equity cap is being raised in order to meet the growing capital requirement of the insurance companies,” Minister of State for Finance Namo Narain Meena said in a written reply to the Lok Sabha.

The Bill, which has been pending in the Rajya Sabha since December 2008, provides for raising FDI cap in private sector insurance companies from 25 per cent to 49 per cent.

The decision to hike FDI cap had already been approved by the Union Cabinet, Meena said, adding “the foreign equity cap is being raised in order to meet the growing capital requirement of the insurance companies’’.

The Standing Committee on Finance, it may be recalled, in its report had opined against raising the FDI cap to 49 per cent arguing that it would expose the sector to global vulnerability.

The Insurance Regulatory and Development Authority (IRDA) has favoured increase in foreign direct investment in the sector to 49 per cent, saying that the decision would help the sector in raising funds which are needed for growth.

RBI plans to gradually replace Rs 10 bank notes with coins

http://www.thehindubusinessline.com/industry-and-economy/banking/rbi-plans-to-gradually-replace-rs-10-bank-notes-with-coins/article4126485.ece

The Reserve Bank of India plans to gradually replace all Rs 10 bank notes with coins as the life of the paper note is only about 9-10 months, the Lok Sabha was informed today.

The Rs 10 coins are in circulation since March 2009.

“The Reserve Bank of India has informed that in the long run, the RBI plans to gradually replace Rs 10 bank notes with Rs 10 coins in the country,” Minister of State of Finance Namo Narain Meena said in a written reply.

However, he said, this will depend upon the capacity of the mints to supply the required quantity of coins.

The Minister said that the RBI has also informed that the average life of a Rs 10 denomination bank note is about 9-10 months and its average cost of printing is 96 paise per piece. The cost of minting Rs 10 coins is Rs 6.10.

“Considering the short life span of Rs 10 banknote, printing of the note is not cost effective,” Meena added.

He further said that with a view to elongating the life of the bank notes, particularly lower denominations, it has been decided by the Government and the RBI to conduct field trials of one million polymer/plastic notes of Rs 10 denominations.

Replying to another question, Finance Minister P. Chidambaram said India has become self-reliant in printing of currencies.

He said that the total requirement of about 17,600 million pieces of bank notes of various denominations is printed within the country in four presses.

Deccan Chronicle owes banks Rs 1,090 cr

http://www.thehindubusinessline.com/industry-and-economy/banking/deccan-chronicle-owes-banks-rs-1090-cr/article4123737.ece

Seven public sector banks have a total exposure of Rs 1,090 crore in Deccan Chronicle Holdings Ltd as on September 30.

However, among these seven, Canara Bank is the only bank where the account has turned into a non-performing asset (NPA). Giving this information in a written reply in Rajya Sabha on Thursday, Minister of State for Finance Namo Narain Meena said, “As against the same (total exposure), they held security of value Rs 1,469.04 crore.” Canara Bank has the highest exposure to Deccan Chronicle with Rs 350 crore, which the bank has classified as an NPA.

“Banks are closely monitoring their loan portfolio and making all out efforts, as per the Reserve Bank of India guidelines in vogue, so that their loan amount does not turn into NPA,” Meena said.

The Hyderabad-based publisher of English daily Deccan Chronicle is in the news for the liquidity crisis it is faced with and lenders initiating a series of cases, including a winding-up petition by one of the lenders. The company-promoted Indian Premier League franchise team Deccan Chargers, which represented the team from Hyderabad, has been removed from the league by the Board of Control for Cricket in India for failure to meet obligations such as providing bank guarantees.

The efforts of the Deccan Chronicle management to sell the team did not materialise. The Hyderabad franchise was recently bagged by Sun TV.

Banks must tell reason for rejecting education loan

http://www.thehindubusinessline.com/industry-and-economy/banking/banks-must-tell-reason-for-rejecting-education-loan/article4123172.ece

Banks have been asked to assign reasons for rejecting any educational loan applications, Parliament was informed today.

“Banks have been advised that rejection of education loan applications has to be with the approval of controlling authority of the branch concerned and the reason for rejection should be communicated to the applicants in writing,” Finance Minister P. Chidambaram told Rajya Sabha in a written reply.

“Indian Banks’ Association has advised the banks to give wide publicity to their grievance redressal mechanism on education loans and to make effective use of the mechanism,” he said.

The Minister also said the “complaints regarding educational loans, as and when received, are taken up with banks concerned for corrective action“.

The banks had Rs 27,000 crore outstanding on education loans as of March 2009, Rs 35,850 crore as of March 2010 and Rs 41,340 crore such loans as of March 2011, as per the data from the Reserve Bank.

The RBI had recently asked banks not to reject any education loan even if the residence of the borrower does not fall under their service area.

Also to remove problems faced by students in obtaining education loans, the Government is working on a scheme under which it would extend guarantee for advances up to Rs 7.5 lakh.

Dhanlaxmi Bank continues to see senior-level exits

http://www.business-standard.com/india/news/dhanlaxmi-bank-continues-to-see-senior-level-exits/493178/

Dhanlaxmi Bank continues to witness senior-level exits, with three more top management executives resigning from their positions in recent months.

Muralidharan Rajamani, the chief operating officer, left the bank last month. “It was a personal choice and there was no specific reason as such,” Rajamani told Business Standard, confirming the development.

Rajamani was the chief executive officer (CEO) of Brics Online Services prior to joining the Bank and has also worked with ICICI Bank and State Bank of India. He joined the Thrissur-based private lender in 2009 under Amitabh Chaturvedi, the former chief executive and managing director of Dhanlaxmi Bank.

Bipin Kabra, who has been the chief financial officer at the Bank since 2009, tendered his resignation and left the bank in October. Manish Kumar , the president and head of human resources and corporate social responsibility at the bank, also resigned. While Kumar was not immediately available for comments, Kabra confirmed his resignation. With these exits, the entire top management team, set up by Chaturvedi, has now left the bank.

In February, 2012 Chaturvedi had resigned from his position, as CEO, following serious disagreement with other board members over the functioning and management of the bank’s operations. P G Jayakumar took charge as the new chief executive of the bank.

Since then several senior executives have put in their papers. Salil Datar, head of branch banking and non-resident business, Rajrishi Singhal, head of policy and research, Rajeev Deoras, head of wholesale banking, and Arvind Hali , head of retail banking, have all left the bank.

The controversial exit of Chaturvedi was preceded by a series of allegations over the functioning of the bank.

The All India Bank Officers' Confederation had accused the bank of window dressing its accounts to show inflated profits. The bank's management had dismissed these allegations and claimed that it was a motivated attempt to de-recognise the bank's performance.

The bank’s financial position has shown signs of improvement in the last couple of quarters, though it continues to incur losses. In July-September quarter, the bank reported a net loss of Rs 18.6 crore.

HDFC Bank launches mobile banking in Hindi

http://www.thehindubusinessline.com/industry-and-economy/banking/hdfc-bank-launches-mobile-banking-in-hindi/article4115614.ece

Targeting 560-million Hindi-speaking population, the second largest private sector lender HDFC Bank on Tuesday launched a mobile banking application in the national language.

Mobile banking services is part of the bank’s overall strategy to use convergent communication platform to engage with customers, Senior Executive Vice-President for Direct Banking Channels and Premier Banking Birendra Sahu said here.

Today 82 per cent of all customer-initiated transactions happen on electronic channels, he said, adding therefore the bank has launched mobile banking solutions ranging from SMS banking, browser-based and application-based applications for smartphones.

There are around 565 million Hindi-speaking populations in the country, he said.

He said the bank launched the English-language mobile banking in July-August last year and already has 12 lakh users, and with the Hindi option, the user base can touch 16 lakh soon.

Quoting a CyberMedia report, he said, Android phones constitute about 56.4 per cent of the total 5.5 million smartphones sold in the first half of the year in the country.

This application will allow customers using an Android smartphone to conduct over 30 banking transactions, ranging from balance enquiry and checking transaction history to fund transfer and bill payments.

Banks can open administrative office in large cities sans RBI permission

http://www.thehindubusinessline.com/industry-and-economy/banking/banks-can-open-administrative-office-in-large-cities-sans-rbi-permission/article4116122.ece

Banks need not seek permission of the Reserve Bank to open administrative offices in large cities (Tier-I), the central bank said today.

“With a view to further increasing operational flexibility of banks, it has been decided to permit domestic scheduled commercial banks (other than RRBs) to open offices exclusively performing administrative and controlling functions in Tier-I centres without the need to obtain prior permission,” it said in notification today.

Currently, banks (excluding RRBs) are permitted to open branches in Tier-II to Tier-VI centres (with population less than 1,00,000) and in rural, semi-urban and urban centres in north-eastern states and Sikkim without seeking its permission.

In its second quarter Monetary Policy 2012-13 in mid-October, the RBI had proposed to permit banks to open offices in Tier-I centres as well.

The RBI, however, said permission granted would be subject to regulatory and supervisory comfort and it would have the option to withhold permissions granted on a case-to-case basis.

Though, the apex bank made it clear that opening of branches including Central Processing Centres (CPCs)/ Service Branches by banks in tier I centres (with population of 1,00,000 and above) will continue to require its prior permission.

Differences with RBI chief, a media creation: Chidambaram

http://www.thehindubusinessline.com/industry-and-economy/banking/differences-with-rbi-chief-a-media-creation-chidambaram/article4116221.ece

Union Finance Minister P. Chidambaram today dismissed as “media creation” the reported differences between the Government and Reserve Bank of India Governor D. Subbarao.

“I have already explained about the... media created differences between Government and RBI (Governor),” he said when asked if his problem with the RBI Governor is because he did not oblige with a rate cut.

“You asked the question again. After two days, I will give the same answer,” he told reporters after a meeting with South Zone Chief Ministers and top officials of public sector banks and financial institutions.

A day after Chidambaram asked the RBI to speed up the process of issuing new bank licences, Subbarao said last Friday that would not be possible till the enabling conditions were fulfilled.

After the RBI refused to cut rates at the latest Monetary Policy review, the Minister had said that if the government has to walk alone to face the challenges on the growth path, it would do so.

To pump up savings, FinMin wants banks to offer ‘gold plan’

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The Finance Ministry has sounded out the Reserve Bank of India (RBI) and commercial banks on the possibility of introducing a gold accumulation plan (GAP). The GAP is likely to be pitched as an alternative to direct investment in the yellow metal by gold-obsessed Indian consumers.

A Finance Ministry committee on ‘Deepening India’s household financial savings’ has suggested the introduction of GAP by banks.

GAP is aimed at encouraging households to shift from physical investment in gold, perceived as a dead investment by policy-makers, into financial assets.

As in a recurring deposit scheme, under GAP, investors sign a contract with a bank to invest a fixed sum every month to buy gold. The bank will pool funds from all GAP accounts to buy gold in the futures market. This move will not immediately add to the physical demand for gold. Hence, it could pass muster with the RBI, say bankers. The metal accumulates in the customer’s GAP account and can either be sold later or redeemed in the form of coins or bars.

A gold futures contract is a legally binding agreement for delivery of gold in the future at an agreed upon price.

Futures contracts are used by hedgers to manage their price risk on an expected purchase or sale of physical gold. Speculators use the contracts to participate in the markets without any physical backing.

Due to high imports of oil and gold, India’s current account deficit (CAD) soared to a historical high of 4.2 per cent of GDP in 2011-12. A CAD results when a country’s total imports of goods, services and transfers exceed exports.

Govt entices youth in Maoist areas with bank jobs

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Lay down arms, take up bank jobs. This seems to be the Government’s underlying message to the youth in the eight States affected by Left-wing extremism and militancy-prone Jammu and Kashmir.

How? Seven public sector banks have been tasked with the responsibility of coaching the youth to become bankers in the nine States.

The Government has asked the banks to take up this challenging project as it will not only wean the youth from anti-national influences but also help them get over the problem of finding personnel to work in these nine States.

The banks are coaching candidates to take the common written examination (CWE) for the clerical cadre. The exam is scheduled to be conducted by the Institute of Banking Personnel Selection (IBPS) in mid-December.

A total of 66 districts in nine States have been identified as reeling under red-terror and militancy. Socio-economic development of the districts could, to some extent, counter these twin threats.

Allahabad Bank has been given the responsibility of coaching the youth in some districts in Jharkhand.

The banks which have been assigned the responsibility for other States are: Andhra Bank (Andhra Pradesh); Bank of Maharashtra (Maharashtra); Central Bank of India (Madhya Pradesh, Bihar and Chhattisgarh); UCO Bank (Odisha); United Bank of India (West Bengal); and Punjab National Bank (Jammu and Kashmir).

“We are conducting six-day coaching programmes for the youth in the districts allotted to us so that they can take the common written examination,” said Raj Kiran Rai, General Manager, Central Bank of India.

To overcome the problem of finding clerical personnel to work in branches in the hinterland, recruitments in public sector banks are now being done State-wise so that locals get to work closer home.

According to Finance Ministry estimates, over the next couple of years, the 21 public sector banks and the five associate banks of the State Bank of India will have 84,489 vacancies across the three cadres — officers (29,122); clerks (43,045) and sub-staff (12,322).

Ethical principles that banks need to follow

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Banking is no ordinary business. Banks are “special” business units which, as financial intermediaries, borrow money from savers to on-lend for productive ventures.

Thus, the underlying is one of the riskiest things in the world — money and money alone.

Banks run on public trust which, in turn, is a function of ethical principles and moral values they follow. The world is witness to numerous bank failures, small and large, which could not withstand the rigour of public trust. The ethical principles that banks follow ought to be of a higher order than those followed by any other businesses.

DEPOSITORS

A depositor saves his hard-earned money in a bank, first and foremost, for ‘safety’ and then ‘return’. By ‘safety’ we do not mean from theft or burglary alone but also safety of the intrinsic value of money. For example, if a depositor puts Rs 100 in his bank, he will definitely get back his nominal Rs 100 plus some interest after the contractual period.

However, economically speaking, does the value of money, in real terms, remain same over time? No. Due to inflation its real value erodes. Hence, the first ethical principle that a bank should follow with respect to its depositors is to protect the ‘real’ value of money by providing an interest rate which would eventually neutralise the impact of inflation and give a positive ‘real’ return over the contractual period.

Are Indian banks doing this at present? The answer is an unequivocal ‘no’. Recently, an RBI Deputy Governor proposed inflation-indexed bonds as a hedge against inflation. Why not inflation-indexed deposits?

The second ethical question is the protection of small depositors’ money from bank failures. In our country, up to Rs 1 lakh is insured by the DI&CGC (Deposit Insurance and Credit Guarantee Corporation).

The limit, which was revised in May 1993, has remained stubbornly static despite rise in per capita income and inflation.

NET INTEREST MARGIN

Our bankers are ‘programmed’ to be obsessed with targets. To achieve the ‘agreed’ level of profits, they artificially keep deposit rates low and lending rates high so that NIM is maximised. Is it ethical to penalise both depositors and borrowers like this?

The RBI Governor D. Subbarao in his speech “Five Frontier Issues in Indian Banking” at BANCON 2010 had argued for “a balanced approach to bring down NIM…”

SUB-PLR LENDING

Until July 1, 2010, banks had got into the unfair practice of sub-PLR lending to certain borrowers. Fortunately, the RBI constituted a Working Group on BPLR (Chairman: Shri Deepak Mohanty) and Base Rate system came into being. Since then the administration of lending rates has become transparent, an essential quality expected from entities like banks at all levels.

CUSTOMER SERVICE

Ethics should dominate customer service rendered by banks. Business etiquette should be an integral part of ethical customer service. Bankers need to be trained in this line. Fundamentally, banks should not differentiate customer service rendered to a small customer and a large customer.

Whether it is a depositor, borrower or simple service seeker there should not be any hidden charges cropping up from time to time because of the ‘fine-print’.

ACCOUNTING, DISCLOSURES

Banks’ balance-sheets and profit and loss accounts along with other statutory disclosures must reflect the true scenario of banks. Data purity and integrity are of paramount importance for banks from the viewpoint of all stakeholders. Corporate governance holds the key here.

EMPLOYEES

If employees are demoralised by unethical policies relating to their service conditions, their frustration would be reflected in a bank’s businesses, howsoever ethical it may be to its customers.

Problems in opening bank accounts are being addressed: FinMin

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In the backdrop of complaints from states that people are facing difficulties in opening bank accounts using Aadhaar card, the Finance Ministry on Friday said the issue is being addressed through organising mass camps for the purpose.

“States’ concerns were very valid that account opening is difficult, which we admit that there is difficultly. So the idea would be to admit the problem and then find a solution. We are going ahead with that,” Financial Services Secretary D K Mittal said here.

He said that the Central government in association with state governments and banks are trying to address the issue by various means, including organising mass camps to help people open bank accounts.

Mittal was talking to reporters after meeting of Finance Minister P Chidambaram with Northern states and Union Territory of Chandigarh along with heads of select public sector banks and financial institutions.

Delhi Chief Minister Sheila Dikshit told reporters problems faced by people in opening bank account using the unique identity card Aadhaar was raised by most of the chief ministers in the meeting.

Union Minister of State for Finance Namo Narain Meena said, among other things, issues related with bank branches were raised at the meeting.

Meena informed that more branches would be opened in unbanked areas of Uttar Pradesh, Jammu and Kashmir and Uttarakhand in the coming months.

Meanwhile, Mittal said issue was raised on how Aadhaar could be made as an instrument for account opening identification without hassles.

“We as the Government of India is committed to that Aadhaar is a KYC (Know Your Customer) for no-frills account. That is happening,” he said.

However, for normal accounts Aadhaar will be only one of the identifications. There will be other identification proof as specified by the RBI which is valid.