BANK CURRENT AFFAIR

RBI releases paper on savings bank deposit rate deregulation

29 april

The Reserve Bank of India on Thursday released a discussion paper on deregulation of savings bank deposit rate, and has asked for feedback by May 20.

In the discussion paper, the central bank pointed out that the deregulation of the savings bank deposit rate, which is currently at 3.5%, would improve monetary policy transmission.

IDBI to push RBI on 'White-label' ATMs

Plans joint venture with private ATM service providers.
IDBI Bank is planning to create a separate entity in partnership with private ATM service providers for running ‘White-label ATMs’ — not tied to any bank — in the country.

“We will soon approach RBI (Reserve Bank of India) with our plan,” R M Malla, chairman and managing director, told Business Standard.

Customers from any bank can deposit or withdraw money from ‘white-label ATMs’. Their banks then pay for the service. Also, such ATMs are invariably owned by a third-party, not a bank.
At present, under RBI guidelines, ATMs can only belong to a particular bank. Transactions of customers from other banks are settled by paying Rs 14 as the charge per transaction by the bank in which the customer has his account. RBI has been reluctant to allow white-label (or no name) ATMs by non-banking entities. Malla said RBI felt only banks should own ATMs so that the flow of funds can be accounted for, regulated and monitored.
“However, with a new entity created jointly and handled by a bank, the situation would be different and RBI’s concerns can be taken care of. If globally this has happened with proper precautions, why should it not work in India with strict due diligence?” asked Malla.
Many services in the banking domain were common, he noted. Obviously, it was difficult for banks to create a common platform for these services. “There could be some entity, however, whose proper due diligence has been done and which specialises in this area. We want to be a major player in this,” he said.
IDBI has started working towards this goal. It has 1,400 self-managed ATMs across the country. “In the next 12 months, we have planned to raise the number to 2,500, with a strong focus on low-cost ATMs,” said Malla. The bank has decided to tie up with ATM service providers for this. Of the 1,100 ATMs to be added during this period, 500-750 ATMs will be outsourced.
“This will save us the cost of setting-up and running ATMs, as we will have to pay the service provider a specified amount per transaction. It will be the service providers’ responsibility to create the infrastructure and run the ATMs,” said Malla.
Adding: “We are evaluating proposals of various ATM service providers. We will set up ATMs with them. Then, at some point of time, we will partner with them for starting the white-label ATMs venture if RBI permits.”

MFIs need fixed regulations: Fitch

A common and consistent set of regulations from a single regulator is necessary to revive Indian microfinance institutions (MFIs). According to a report by rating agency Fitch, different sets of regulations imposed by different regulators may result in an uneven playing field.
The Reserve Bank of India (RBI) and the Andhra Pradesh government seeking to regulate the sector in the state can be seen as an example of multiple regulators vying for control. Such instances would only lead to harmful consequences, the report said

“The experience of cooperative banks in India suggests multiple regulators may not be as effective as a single, strong regulator. MFIs may also find it difficult to comply with different sets of guidelines. A common and consistent set of regulations would add stability to MFIs’ operations and enhance creditor comfort”, said Ananda Bhoumik, senior director (financial institutions), Fitch.

MFI loans in Andhra Pradesh were the worst hit in the country, owing to uncertainty over regulation of the industry in the state. Collection efficiencies dropped from 99 per cent in September 2010 to below 50 per cent in December 2010. Andhra Pradesh accounts for about 29 per cent of the total MFI loans in the country, and the deterioration in portfolio delinquency in the state resulted in many large MFIs seeking to restructure their own borrowings from banks, the report said. Rising delinquencies in Andhra Pradesh could also spill over to the adjacent states of Karnataka and Tamil Nadu, it added.
RBI recommendations on interest rates and margin caps on lending, together with tighter loan-loss provisions and general provisioning norms, may lead to consolidation, since smaller players would be forced to re-examine their business models. Under the new guidelines, debt and equity funding may be constrained, since investors would reassess their risks. “From a creditor’s perspective, the lower pace of growth is good news. While lower margins would somewhat erode the defence against shocks to asset quality, the minimum core Tier 1 ratio of 15 per cent provides comfort,” Bhoumik said

RBI creates two more ED posts

The Reserve Bank of India (RBI) has decided to increase the number of its executive directors from seven to nine. The two additional executive directors would be appointed in May. Since one of the executive directors would replace deputy governor Shyamala Gopinath, who would retire in May, RBI would conduct interviews to select a total of three executive directors. The move follows a review of the various important posts in RBI.
Among the eligible candidates P Vijay Bhaskar, regional director of Bangalore, is the most senior chief general manager, followed by B Mahapatra and G Padmanavan. A candidate requires three years of residual service to be eligible for the post of executive director. The retirement age for RBI employees is 60 years.

Of the seven RBI executive directors, V K Sharma is the most senior, followed by V S Das. G Gopalakrishna, HR Khan, D Mohanty, S Karuppasamy and R Gandhi are the other executive directors.

Bank of Baroda chief M D Mallya is BS Banker of the Year

Bank loans grow 21.4% in 2010-11, deposits rise 15.8%

Bank loans registered a growth of 21.38 per cent in 2010-11, while deposit growth stood at 15.84 per cent, according to data released by the Reserve Bank of India (RBI). While credit growth was higher than RBI’s projection of 20 per cent in 2010-11, deposit growth fell short of the 18 per cent projection. Deposit growth for 2009-10 was 17 per cent, while the growth in credit was 16 per cent