Overseas borrowed funds : RBI says overseas borrowed funds can be parked with banks in India

Mint – Sat, Nov 22, 2014

The borrowers are required to bring the proceeds meant for rupee expenditure such as payment for spectrum allocation, capital goods into India

 Reserve Bank of India (RBI) on Friday allowed companies borrowing overseas to park the funds as term deposits with local banks for a maximum period of six months.

In a notification on its website, the central bank said this facility is available for entities that have borrowed funds for permitted end uses such as local sourcing of capital gods, on-lending to self-help groups or micro-credit and payment for spectrum allocation, among others.

"No charge in any form should be created on such term deposits i.e. to say that the term deposits should be kept unencumbered during their currency," RBI said in its notification.

Such deposits should be exclusively in the name of the borrower and they should be available for liquidation as and when required, the regulator said.

RBI stated that the amended policy would come into immediate effect and all other aspects of the external commercial borrowing (ECB) policy would remain unchanged.

On 3 September, the banking regulator had eased certain ECB norms by allowing non-resident lenders to extend rupee loans to borrowers in India, after following certain norms regarding currency swaps with local banks. Prior to that, all eligible borrowers were allowed to raise ECB funds in rupees only from their foreign equity holders.

As per latest monthly data available on the RBI website, Indian corporate entities borrowed $2.56 billion worth of ECB loans in October 2014. Of this, Reliance Jio Infocomm Ltd and Tata Motors Ltd had both borrowed $750 million each through the ECB route.

Credit cards :RBI Issues Clarification on Credit Cards

 PTI  22 Nov 2014

Credit cards issued by the Reserve Bank of India! Yes, that's the latest trick fraudsters are using to dupe hapless people, the central bank has found recently.

"The gullible member of the public is sent a credit card which allows withdrawal of money up to a certain limit, albeit a small sum, from a bank account," RBI stated explaining the modus operandi in its notice.

"Having gained the confidence of the victim thus, the fraudster gets him to deposit a huge sum of money in the same bank account. Once the money is deposited, the card stops working and that would also be the last time the holder of the card (victim) would hear from the fraudster," the central bank added.

The Reserve Bank was forced to issue a notice on Friday after the fraud came to light. It reiterated that India's central bank does not carry out any business with an individual, whether through savings bank account, current bank account, credit card, debit card, online banking services or receiving and holding funds in foreign exchange or any other form of banking services.

The Reserve Bank also asked public to be cautious about such fictitious offers being made in name of International Monetary Fund (IMF), income tax authorities, customs authorities or public figures like Governor, Dr. Raghuram Rajan or other senior RBI officials.

In recent years, the Reserve Bank has been target of many such scams. Last November, emails circulating in the name of Governor Rajan asked recipients for "fund release order fee charges" of Rs 9,500. Such mails also solicited other personal information like residential address, mobile phone number, bank account and PAN card details.

Earlier this year, Dr Rajan exhorted members of the public to use social media in identifying such frauds.

"Can we enlist social media in enabling the public to identify fraud and can we as regulators filter that information in careful and responsible way so that we can collect information about what is happening and react to it?" he had said at the annual Nasscom leadership conference in Mumbai.

RBI :To get future ready, RBI re-drafts core purpose

BL : Naga Sridhar :HYDERABAD, NOVEMBER 11:2014

To retain autonomy, independence of views

  

 

In line with the changing demands of the economy, the Reserve Bank of India is re-thinking its role and function.

Contemplating a change in its core purpose, for the first time in its over 79 years of existence, the RBI is seeing a shift in its role from the bland “monetary stability” (in its current Preamble) to fostering “monetary and financial stability conducive to sustainable economic growth and to ensure the development of an efficient and inclusive financial system.”

Ready for approval

The draft of the new document re-stating the core purpose, values and vision — a copy of which is withBusinessLine — has been prepared by the senior management committee and will be sent to the central bank’s board for formal approval soon.

The purpose of the new vision, according to the RBI, is to delineate its strategic objectives and provide the framework and backdrop within and against which its policies will be formulated and the direction the bank would take.

The thinking at the RBI has been on these lines for quite some time now. During the central bank’s Platinum Jubilee celebrations in April 2010, the then Governor D Subbarao had said: “Even at the risk of being clichéd, let me say that at the Reserve Bank, we need to ‘think global and act local’. The idea is not to fight globalisation but to manage it to the country’s best advantage.’’

Thus, the draft document focuses on issues of current importance such as autonomy in functioning, fostering confidence in the internal and external value of the rupee, and achieving inclusive growth. The RBI appears to be significantly enlarging its scope even while sending a strong message of retaining its “independence of views”, and “valuing’’ independent judgment in formulating its policies.

This goes well beyond what the Preamble says now “...to regulate the issue of bank notes and keeping of reserves with a view to securing monetary stability in India and generally to operate the currency and credit system of the country to its advantage.’’

Perfect timing

The vision document comes at a time the Government and the RBI have been discussing the central bank’s role. During a recent visit to the Indian School of Business here, RBI Governor Raghuram Rajan had said the central bank was discussing various issues with the Government, including fixing of inflation targets and implementation of the recommendations of the Financial Sector Legislature Reforms Committee on changes in the RBI’s role.

Sebi says RBI should've handled BoR case better

 BS :Jayshree P Upadhyay  |  Mumbai  

September 30, 2014 Last Updated at 00:50 IST

Stung by allegations of going easy in the Bank of Rajasthan(BoR) case, market regulator Securities and Exchange Board of India (Sebi) has shifted the blame on the Reserve Bank of India (RBI).

In a letter to the department of economic affairs (DEA), Sebihas said merger between the erstwhile BoR and ICICI Bank was approved by the banking regulator despite being "fully aware" of the "surrogate acquisitions" made by the former's promoter entities.

"When the amalgamation was approved, Reserve Bank of India was fully aware about the surrogate acquisitions by the promoter entities and despite the same, it was decided to extend the full benefit of the amalgamation to the promoters of Bank of Rajasthan without any caveats," Sebi has said in its letter to DEA, the contents of which have been seen by Business Standard.

Sebi's letter was with reference to the series of complaints received by the Central Vigilance Commission and the finance ministry against the market regulator in the matter of BoR questioning the low penalty and quality of investigation.

Sebi has said its job centred around probing whether there was any market manipulation by the promoters, while theRBI was the agency which had primary grievance against the promoters and could have handled the matter more seriously.

An email seeking comments on the matter to Sebi and RBI didn't elicit any response.

The violations in the case of BoR date back to 2009, where the promoters - the Tayal group - had actually increased their shareholding through front entities, while disclosures made by them to the exchanges showed that they had reduced their holdings. These violations had occurred ahead of the merger between BoR and ICICI Bank in 2010.

Sebi in March 2010 had passed an order against 100 promoter entities of BoR, banning these from accessing the capital market for acquiring shares under fictitious and benami names beyond the limit permitted by RBI. The order followed a February 2010 order by RBI, imposing a penalty of Rs 25 lakh on BoR.

THE BANK OF RAJASTHAN CASE

2007 June: Bank of Rajasthan promoters’ shareholding stands at 44.18%, which they had to bring down to 10%, according to RBI guidelines 2009 November: RBI refers matter to Sebi for examination of violations of the Securities Act December: Promoters declare to stock exchanges their shareholding has been reduced to 28.61%. But RBI inspection reveals promoter holding increased via surrogate acquisitions 2010 February: RBI imposes Rs 25-lakh penalty on bank March: Sebi passes ex-parte order against BoR promoters, barring them from the securities market. Sebi investigation reveals promoters increased their shareholding to 63.15% August: RBI approves merger of Bank of Rajasthan with ICICI Bank; Sebi issues no-objection certificate 2012 March: Final order by Sebi lifts ban on 118 entities; refers matter to adjudication officer for penalty 2013 February: Sebi imposes Rs 30-crore penalty  on 118 entities 2014 February: SAT revises penalty to Rs 20 crore on 103 entities

"The additional shareholding of the promoters through their front entities could have been considered an unlawful gain, as the amalgamation was a subsequent event and could have also resulted as a loss for the shareholders of BoR as in the case of Global Trust Bank, where the shareholders of Global Trust Bank were not allotted shares of Oriental Bank of Commerce," Sebi has said.

Sebi has also pointed out that the penalty levied by RBI was only Rs 25 lakh even as the penalty in the Banking Regulations Act can be twice the amount involved in such contravention or default.

The regulator in the letter has said it has treated this matter very seriously to check for instance of price or volume manipulation but "no such instance came to light and the offence was limited to wrong disclosure".

The market regulator has also observed that RBI had approved the merger in 2010 even before completion of investigation. However, interestingly, even Sebi granted a no-objection certificate to the merger in 2010, stating that its March 2010 order would not come in the way of the proposed merger.

Sebi has told the DEA that it could not direct the promoters of BoR to make an open offer despite their violating the creeping acquisition limit of 5 per cent as by the time the adjudication proceedings got initiated, the lender was already merged with ICICI Bank.

Last week, the Central Bureau of Investigation (CBI) initiated a preliminary enquiry against Sebi's executive director R K Padmanabhan, who had investigated the case. Also, the minority shareholders of BoR have filed a writ petition in the Bombay High Court against Sebi for imposing an inadequate penalty of just Rs 30 crore on the promoter entities, who the petitioners allege made unlawful gains of more than Rs 700 crore. Sebi's Rs 30-crore penalty was later revised downwards to Rs 20 crore by the appellate tribunal.

Banks to be careful about Jan Dhan Yojana: RBI

P Vijaya Bhaskar, Executive Director, Reserve Bank of India addresses on RBI perspective on the role banks can play in reviving industrial growth at Banking Colloquium in Kolkata on Friday. Photo: Ashoke Chakrabarty

PTI 19 Sep 2014

The Reserve Bank on Friday warned the banks to be more careful while opening accounts under the Jan-Dhan Yojana, saying that a single individual could open multiple accounts in the lure of Rs 1 lakh insurance cover.

“There are some caveats when the banks are implementing the financial inclusion scheme under the recently launched Jan-Dhan programme,” RBI Executive Director P Vijay Bhaskar said at a CII seminar in Kolkata on Friday.

He said people could open accounts in different banks using different identity documents like PAN card, Aadhar among others in the lure of getting insurance cover of Rs 1 lakh from all the banks.

The banks should have a single information sharing system by which this possible misuse could be stopped. Another possible threat was ‘smurfing’, the RBI official said.

In this case, hawala operators would spilt the whole amount into several small units beyond the threshold using several bank accounts and send money overseas.

The last was ‘money mules’ by which an individual would operate through another person’s bank account.

Talking about the north-eastern region, he said the SLBCs and the SLCCs should take steps to improve the credit-deposit ratio of the region as the CD ratio was much lower than the national average.

Earlier this week, RBI Governor Raghuram Rajan had cautioned banks on the risks involved in just hunting for numbers with regards to Jan Dhan scheme, asking them not to compromise on core objectives of the programme.

“When we roll out the scheme, we have to make sure it does not go off the track. The target is universality, not just speed and numbers,” Dr Rajan had said.

The scheme can be a “waste” if it leads to duplication of accounts, if no transaction happens on the new accounts and if the new users get bad experiences, he had added.

RBI may issue final norms on small, payments banks in 2-3 months

PTI Sep 14, 2014, 11.46AM IST

The Reserve Bank is likely to issue final guidelines on small and payments banks within 2-3 months, paving the way for corporates to enter these two segments.

The final guidelines on small and payments banks are expected in the next 2-3 months, sources said.

Draft guidelines for small and payments banks were issued by the RBI in July and comments were invited till August 28.

It is examining the suggestions received and is in the process of finalising the norms for such banks, sources said.

The final norms will allow micro finance institutions, telecom players, non-banking finance companies (NBFCs) and public sector companies eligible to apply for bank licences once RBI invites applications for the same.

The proposed small banks will provide a whole suite of basic banking products such as deposits and supply of credit, but in a limited area of operation.

On the other hand, payments banks will offer a limited range of products such as acceptance of demand deposits and remittances of funds. They will have a widespread network of access points particularly in remote areas, either through their own branch network or through Business Correspondents (BCs) or through networks provided by others.

"Both payments banks and small banks are 'niche' or 'differentiated' banks, with the common objective of furthering financial inclusion," the RBI had said while issuing the draft guidelines for licensing these banks.

Small banks can collect deposits and disburse small-ticket loans to farmers and small and medium businesses, unorganised sector through high technology-low cost operations, as par draft norms.

Payment banks will cater to marginalised sections of society, including migrant labourers, for collecting deposits and remitting funds. They would, however, not be allowed to indulge in lending operation.

Such banks can be set up with a minimum capital of Rs 100 crore as against Rs 500 crore required for normal commercial banks, as per the draft norms.

RBI says 70 years upper age for private bank CEOs, whole-time directors

Following this notification, nobody will be allowed to continue as a director in private sector banks beyond the age of 70.

Joel Rebello Mint 9 Sep 2014

The change has been done in light of provisions in the Companies Act, 2013 

Mumbai: The Reserve Bank of India (RBI) on Tuesday capped the maximum age till which a person can continue to be managing director, chief executive officer or a whole time director in a private sector bank at 70 years.

Previously there was no such age limit for directors. The change has been done in light of provisions in the Companies Act, 2013, which says, “No company shall appoint or continue the employment of any person as managing director, whole time director or manager who is below the age of 21 years or has attained the age of 70 years,” RBI said.

Following this notification, nobody will be allowed to continue as a director in private sector banks beyond the age of 70. However, bank boards are free to prescribe a lower retirement age for whole time directors and CEOs as an internal policy, RBI said.

Mega surplus transfer by RBI, expected big-bang share sale ease NDA government's fiscal woes

Deepshikha Sikarwar, ET Bureau | 3 Sep, 2014, 

NEW DELHI: The fiscal worries of the NDA government, which is set to complete 100 days in office this week, have ebbed significantly on the back of bumper surplus transfer by the central bank as well as expectations of a big-bang share sale programme driven by the stock market rally and an increase in tax revenues aided by economic recovery.

The finance ministry also expects increase in public provident fund limit and the launch of new savings instruments, like one for the girl child, to stir up small savings and help the government cut market borrowings in the second half. Firsthalf borrowings were cut by Rs 16,000 crore to Rs 3.52 lakh crore from the initially planned Rs 3.68 lakh crore. "Fiscal deficit target of 4.1% of GDP is very much doable," said a finance ministry official.

Analysts, too, share this optimism. "...We expect the improved momentum seen in July to continue on the back of better revenues (pick-up in tax; divestment process) and containment in expenditure (particularly fuel subsidies), said Citi economist Rohini Malkani in a note.

Robust disinvestment pipeline this year

"This bodes well for the government meeting its 4.1% fiscal deficit target and India's sovereign credit profile," said Malkani.

The fiscal deficit touched 61.2% of the budgeted target for 2014-15 in the first four months of the year, but North Block mandarins are not losing sleep over it as they see the deficit losing steam once revenues from multiple sources begun to flow in.

The government's disinvestment plan will kick in within a few days with sale of 5% stake in ONGCand SAIL and 10% in Coal India

These three stake sales alone will bring the government close to the budgeted PSU disinvestment target of Rs 43,425 crore.

The robust disinvestment pipeline for the current fiscal also includes share sales in several other companies such as Power Finance Corporation National Hydroelectric Power Corporation, Rashtriya Ispat Nigam Ltd, Rural Electrification Corporation and Hindustan Aeronautics Ltd.

In addition, Rs 15,000 crore is expected from sale of the government's residual stake inHindustan Zinc and Balco, the two erstwhile state-run companies. A booming stock market could help the government raise more than expected. The Sensex crossed the 27,000 mark on Tuesday to close at an all-time high of 27,019.39, up 151.84 points.

Last month, the government's finances got a boost when the Reserve Bank of India transferred its entire surplus of Rs 52,679 crore to the central kitty, a 60% increase over what the central bank had transferred last year. The government had budgeted Rs 62,414.18 crore as receipts from public sector banks as dividends and the central bank, and will now easily overshoot this target.

A government official said the surplus on this account would help the government compensate for any shortfall in tax collections. But he was optimistic that tax collections would pick up in the second half as there is a further economic pick-up.

First quarter net tax revenues rose just 1.2%, but collections for July grew 10.6% on the back of improved corporate tax and excise duty collections. The government has budgeted for a growth rate of 16.9% in tax collections for 2014-15.

"The numbers look much better than they seemed around budget," said DK Pant, chief economist, IndiaRatings, even though he sounded a note of caution on the tax revenues. The finance ministry also believes that things are under control on the expenditure front.

Reduction in global crude prices and the monthly 50 paise increase in diesel rates have brought the pump prices of the fuel close to market prices, helping the government cut its subsidy outgo on account of petroleum products.

With state governments yet to roll out food security law, the food subsidy bill could also come in lower than the budgeted Rs 1 lakh crore plus figure . Plan expenditure has been tardy with spending remaining subdued due to elections in the first quarter and could only see a marginal pick-up in second half.

North Block officials are optimistic that global agencies will take the improved macroeconomic climate into account while deciding India's sovereign rating this year.

R B I :Set timeline to process loans

PTI 1 Sep 14

To expedite credit decision, the Reserve Bank of India (RBI) today asked banks to set a timeline for disposal of loan proposals but did not ascribe a particular time frame for the same.

“Banks should clearly delineate the procedure for disposal of loan proposals, with appropriate timelines, and institute a suitable monitoring mechanism for reviewing applications pending beyond the specified period,” RBI said in a notification.

The central bank also asked banks to make suitable disclosures about timelines by conveying credit decisions through their websites, notice boards and product literature, among others. However, it said that banks should not compromise on due diligence requirements.

The move came after RBI noticed that there have been inordinate delays by banks to convey credit decisions, leading to delays in project implementation.

In its earlier guidelines, the RBI had stipulated that the timeframe within which loan applications up toRs. 2 lakh ought to be disposed of, should be indicated while accepting loan applications.

“It is felt that a similar practice of time-bound decision making may be required in the case of other loans too,” the regulator said, adding that banks must put in place the required system within 30 days

RBI to soon issue Rs. 1,000 denomination banknotes with inset letter 'R'

 

BL Mumbai 15Aug 14 PTI

The Reserve Bank of India will soon issue Rs. 1,000 denomination banknotes with inset letter 'R' in the Mahatma Gandhi series-2005.

“The Reserve Bank will shortly issue Rs. 1,000 denomination banknotes incorporating rupee symbol, with ‘R’ inset letter, in the Mahatma Gandhi series-2005,” the RBI said in a notification.

The year of printing ‘2014’ will be printed on the reverse of the banknote.

The design of these notes to be issued now is similar in all respects to the Rs. 1,000 banknotes in Mahatma Gandhi series-2005, issued earlier, RBI said.

“All the banknotes in the denomination of ‘1,000 issued by the Bank in the past will continue to be legal tender.”

MG series-2005 banknotes are issued in the denomination of Rs. 10, Rs. 20, Rs. 50, Rs. 100, Rs. 500 and Rs. 1,000 and contain some additional or new security features compared to the previous MG series notes.

In addition to extra security features, MG series-2005 banknotes have the year of printing on the reverse of the banknotes which is not present in the pre-2005 series.

(This article was published on August 15, 2014)