Public sector banks lagging in risk appraisal skills

Sri G Gopalakrishna...RBI ED

Most banks have identified training gaps in the areas of credit/risk management, agriculture programmes, and foreign exchange, according to Reserve Bank of India Executive Director G. Gopalakrishna. These areas require an equal measure of knowledge of rules, practices and specialised skills for appraisals, on the one hand, and an awareness of markets, on the other, he said while inaugurating the Nitte Institute of Banking and Finance at Nitte University in Mangalore. Banks, he said, require training by external experts and institutions in these areas.

Stating that the training needs cannot be uniform across the banking industry, as each bank has a unique structural make-up of its own with a different set of aspirations, he said: “What applies to a public sector bank may not be applicable for a different skill set present, say, in foreign banks and new generation private sector banks.” Public sector banks have shortage of skills in credit appraisal and risk management, whereas new generation private sector banks and foreign banks have better skills in these areas, he said....Read more >> Click here

New bank licences: Sebi scans listed applicants, group firms

As RBI gears up to issue new bank licences, capital markets regulator Sebi has also a job at hand that is of scrutinising all applicants coming under its jurisdiction directly or through group entities. Sebi's scrutiny follows detailed queries shot off by RBI to various regulators in India and abroad as part of its due-diligence of entities seeking to enter banking arena. According to a senior official, Sebi is looking into the capital market track-record of all the group entities of 26 banking aspirants, some of whom are either listed entities or have presence in Sebi-regulated businesses like mutual funds, brokerage and investment banks. The area of prime focus for the Securities and Exchange Board of India (Sebi) is action taken by or underway for violations to various market regulations, he added. The scrutiny is expected to be over this month itself. RBI is granting new bank licences for the first time in about a decade and preliminary screening process is underway for 26 entities that have submitted their applications....Read more >> Click here

Rajan unveils ‘five pillars’ to strengthen banking system

Reserve Bank of India Governor Raghuram Rajan on Tuesday unveiled his five-point plan to overhaul the RBI's developmental measures over the next few quarters. The first of the "five pillars" of the plan is clarifying and strengthening the monetary policy framework. "Action on the monetary policy framework will follow the submission of the Urjit Patel Committee report. A number of measures to strengthen bank structures and financial markets have already been announced, and more will follow as they are worked out. The strategy to expand financial inclusion will be formed by the Nachiket Mor Committee report, though significant efforts to explore the use of technology are already under way," Rajan said.

Read more >> Click here

Bank licence: RBI may miss deadline

The January deadline for awarding of licences for new banks might get stretched, it would appear. The date was set by Reserve Bank of India (RBI) GovernorRaghuram Rajan on his first day in office. In the first phase, a committee chaired by one of his predecessors, Bimal Jalan, is to vet the 26 applications. The panel is to have its first meeting this Friday. However, RBI is still collating information on all the applicants and the process is taking time. The central bank wants additional information of the promoters and their group companies, among other things. “It wanted to know the source of funds for the promoter group, income tax records, funding sources and track record of various group companies and balance sheets for more years,” said a person familiar with the development.

Read more >> Click here

Savers may gain immediately from Raghuram Rajan's monetary policy

 If at all there is one segment that gains immediately from governor Raghuram Rajan's monetary policy, it will be savers. A deposit war among banks is likely as the Reserve Bank of India frees up the interest rate payment option to depositors at less than a quarterly interval, which will allow banks to woo depositors with a little extra payment, even without raising interest rates. This comes above the key interest rate increase, which could raise the return on bank deposits. The option may put marginal pressure on banks, which have already been facing strains on their interest rate margins as they are compelled to pay high rates to depositors while the government has directed them to lower lending rates.

Read more >> Click here

RBI takes steps to make system consumer friendly

With aim to improve quality of consumer service and protection, Reserve Bank of India will issue norms for providing public facing services in an time bound manner. Similarly, it decided to implement recommendations of Financial sector Legislative Reforms Commission (FSLRC) which dealt with consumer protection and capacity building.

All instructions relating to consumer services/consumer protection would be consolidated and will be placed on the Reserve Bank’s website as a single group of instructions by end-March 2014. RBI will also examine if there are any gaps. A Committee will be set up to examine capacity building, including basic and job specific knowledge requirements. The panel would also examine whether a system of formal certification is warranted for certain job descriptions within RBI, the financial entities, and market segments regulated by it.

Read more >> Click here

Bankers ask RBI to avoid regulatory arbitrage in specialised banking licence

Top bankers in the country today requested the Reserve Bank of India (RBI) to ensure that there is no regulatory arbitrage while offering specialised banking licences to some of the new players. The banking regulator had said it aims to strengthen the banking structure in India over the next few quarters through new entry,branch expansion and new varieties of banks. It had invited views from chiefs of existing banks on this subject. "In today's meeting, they (RBI) were wanting to hear our views. The biggest issue is that we should not disturb the equation of regulation and create a regulatory arbitrage. When we talk of (specialised) licensing, the biggest thing that needs to be kept in mind is that we do not allow a regulatory arbitrage to get created. That is the point that was really made," Chanda Kochhar, managing director and chief executive officer of the country's largest private lender ICICI Bank, said.

Read more >> Click here

RBI : Monetary Policy Highlights

The repo rate is now at 7.75 per cent. He had also raised it by 25 bps in the mid-quarter review in September.Along expected lines, the Reserve Bank of India Governor hiked the repo rate by 25 basis points in the October monetary policy review today. Repo rate is the rate at which banks borrow short term funds from RBI. Inflation has been on the upswing during the past few months. Wholesale price index (WPI) inflation touched 6.46 per cent in September while consumer price index inflation was at 9.84 per cent. Both these measures have been way beyond the comfort level of the RBI.

MSF rate cut by 25 bps

The Governor has also cut the marginal standing facility (MSF) rate by 25 bps to 8.75 per cent. The corridor between the repo rate and the MSF rate is now back to 100 bps signalling the return to normalcy in currency markets.

Read more >> Click here

RBI allows banks to pay interest at shorter intervals

Savings bank account and term deposit holders can now earn interest at shorter intervals, with the Reserve Bank today allowing banks to revise the periodicity of interest payments.  "As all commercial banks are now on core banking platforms, it has been decided to give banks the option to pay interest on savings deposits and term deposits at intervals shorter than quarterly intervals," RBIGovernor Raghuram Rajan said in its Second Quarter Review of Monetary Policy 2013-14.  Presently, banks are required to pay interest on savings and term deposits at quarterly or longer intervals.  The savings deposit rate for most banks is 4 per cent per annum, while in some cases, it is as high as 7 per cent. The interest rate on savings bank accounts is calculated on a daily basis. Term deposit rates are 8-9 per cent for tenures of one year and above. 

Read more >> Click here

Additional capital only if banks lend more, says Rajiv Takru

A top Finance Ministry official said on Saturday that additional capital infusion (over and above the Rs 14,000 crore sanctioned recently) into public sector banks will depend on their performance on the loans front, especially retail loans. Rajiv Takru, Secretary, Department of Financial Services, also ruled out tapping the World Bank for infusing capital into the public sector banks (PSBs). The observation on additional capital comes in the backdrop of the government wanting public sector banks (PSBs) to lend more to the retail – auto and housing – segment at cheaper rates. While banks have cut or waived the processing fee on retail loans for the ongoing festival season, they have held back from cutting lending rates. Reason: Banks are already lending at, or slightly above, their minimum lending rate, also known as the base rate.

Read more >> Click here

RBI eases rules for expanding bank network

The Reserve Bank of India (RBI) told banks that extension counters, satellite offices, mobile branches, Central Processing Centres (CPCs), service branches and administrative offices can be freely opened in any centre. Besides that, RBI also said that these will not be reckoned for the criteria of opening of at least 25 per cent of total number of branches opened during a financial year in unbanked rural centres. Neither the total number of branches opened in tier-1 centres during the financial year. RBI also said that they will have the option to withhold the general permission now being granted to banks which fail to meet the criteria along with imposing penalty.

Source Business Standard : >> Click here

Indian banking scenario and RBI’s new avatar

Any right thinking Indian will certainly question the wisdom of the Raghuram Rajan, the newly appointed governor of Reserve Bank of India (RBI) mooting a proposal to allow foreign banks to take over our over century old  domestic banks. The situation is so bad overseas that our veteran bankers can do well to manage over the badly performing foreign banks.

 The statement in Washington on unveiling “major banking reforms” that will entail allowing foreign banks to take over domestic banks has rightly raised heckles across the country.  Bharatiya Janata Party (BJP), the main opposition party, has come out with a strong statement to say that this goes contrary to the Centre’s stand that its “policy of nationalisation of banks will not be reversed. 

Read more >> Click here

Bigger play for foreign banks easier said than done?

Could Raghuram Rajan’s announcement on letting foreign banksenter India in a bigger way, be easier said than done? At a time when there is literally no good news coming out of India, and the government is in no position to undertake big reforms in a pre-election year, the RBI seems to be initiating these bold moves in a bid to attract more capital into the country.

Rajan spoke about the need to allow for bigger participation of foreign banks during his inaugural speech as well, and he reiterated this objective in Washington yesterday saying the policy framework for entry of foreign banks in a “big way” would be unveiled in the next few weeks.  “A lot is already on the table starting with the passage of the banking laws amendment bill enhancing voting rights cap in banks from 10-26%. Harmonizing ownership guidelines will be a pre-requisite to consolidation.

Read more >> Click herea

New rules may allow foreigners to take over of Indian banks

The Reserve Bank of India (RBI) will soon come out with new rules for the entry of foreign banks that may even allow them to take over Indian banks, RBI Governor Raghuram Rajan has said.

"That is going to be a big big opening because one could even contemplate taking over Indian banks, small Indian banks and so on," he said at an event of the Institute of International Finance here Saturday.

"We're coming out with details on that in the next couple of weeks."

"By setting up wholly owned subsidiaries, foreign banks will get more opportunities to expand in India," Rajan said. "We will allow you a lot of freedom on branching."

Read more >> Click here

RBI to launch new RTGS system from Oct 19

Reserve Bank of India (RBI) will introduce revamped Real-Time Gross Settlement System (RTGS) from October 19, 2013 to facilitate on-line real time settlement of payments. The revised platform will be used for settlement of transactions amongst members. The RTGS System will process transactions like Inter-institutional \ inter-bank transaction that is funds transfer purely between two members / participants, RBI said a statement. 

It would also deal with Customer transaction – funds transfer / receipt on behalf of the customer of a RTGS participant member. Government transaction – Funds transfer/receipt on behalf of Government Accounts by a participating member.

Read more >> Click here

RBI governor Raghuram Rajan's initiatives may see public banks close valuation gap with private peers

Stock markets throw up many a paradox. But nothing is starker than the valuation gap between the public sector banks and private ones. Of course, there may be good reasons for that, but that may be changing soon if the Reserve Bank of India governor Raghuram Rajan has his way in transforming the banking system treats loans recast and defaulters. The dividend yield on Union Bank is at 6.9% and for Syndicate Bank it is at 9.3% and they trade at nearly half their book value, but HDFC Bank which has a yield of 0.85% is trading at triple the state-run peers. 

Read more >> Click here

'RBI must give bank licences to corporates with proven record'

The Reserve Bank must issue new bank licenses to corporate houses with proven track records in order to achieve financial inclusion as public sector banksalone will not be able to spread banking services to the entire country, PHD Chamber of Commmerce said today.  "Private banks' entry has only made banking sector more competitive ever since their operations came into being," PHD Chamber President Suman Jyoti Khaitan said. Private banks have made state-owned banks more aggressive in product innovation and customer retention by offering better service quality, thereby making a strong case for interested corporate houses with established credentials to be issued new bank licences, he added. 

Read more >> Click here

RBI considering making bank licensing process more frequent

In order to expand the reach of banking, the Reserve Bank today said it is considering making the bank licensing process more frequent and allow free entry of banks as and when necessary. “We propose to carry forward these ideas and come up with a detailed road map of necessary reform and regulations for free entry and making the licensing process more frequent after we get comments from the stakeholders,” RBI Deputy Governor K. C. Chakrabarty said here. RBI is in the process of issuing new bank licences consistent with the highest standards of transparency and diligence, he said. RBI has already come out with a discussion paper on the banking sector in India, on which the regulator has invited comments from stakeholders. “The document explores the possibility of a differentiated licence for small banks and wholesale banks, the possibility of continuous on-tap licensing and the possibility of converting large urban co-operative banks into commercial banks,” he said.

Read more >> Click here

Chakrabarty says only provisional list of new banks by Jan

Reserve Bank Deputy Governor K C Chakrabarty has said only a provisional list of new bank licencees will be announced by January and it will take at least two years for a player to become operational."Let me clarify, no new bank will come by January. A provisional list of applicants who are eligible to get a licence will be decided in January. New banks will take at least two years to come," he said here over the weekend.RBI Governor Raghuram Rajan has been repeatedly assuring that some concrete action will be taken on issuing new bank licences before the end of the term of deputy governor Anand Sinha, who is in charge of banking department, in early February.After announcing a panel headed by former RBI Governor Bimal Jalanto look into the issue, Rajan on Friday followed up by announcing the remaining members of the committee.

Read more >> Click here

Banks to follow uniform loan classification rules, share defaulter information

 RBI Governor Raghuram Rajan is leaving no stone unturned in his efforts to end promoter abuse of the benign loan restructuring regime and is soon poised to mandate all banks to stick to uniform loan classification norms.Three people familiar with the idea said the governor, who has been meeting bank chairmen over the past two to three weeks independently and some in groups, has said lenders should share information about defaulting clients. Rajan is building a repository of information about defaulters that could help banks ensure they do not get duped by unscrupulous promoters. 

Read more >> Click here