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Monday, December 31, 2012

Another Height of Positivity-- Addhar Linked Cash Transfer


In a country where more than  ninety percent of population cannot afford enough money to survive , to arrange a small house, to meet expenses for education , electricity, water and to save his or her image in the society , Government of India is telling the people that every villager will now have a bank account , An Adhhar Card and ATM facility and finally assuring them of bright future  It seems to be that farmers who are crying for loan for farming and other allied activities will have to satisfy with a No-frill SB account in the name of Financial Inclusion.

In a mad rush to comply the order of Ministry of Finance , bankers in a few specified districts worked day and night and opened savings accounts of  almost every villager .I remember the days when Late Sanjay Gandhi was in power without post and when all school teachers, doctors and  all government servants and ministers were given target for Family Planning. Under pressure of target and in fear of punitive action from heads of departments , teachers ,doctors and government servants did not hesitate to increase number by doing family planning operation of even non-married guys, old man and women and even   by adding fake names and name of those who had already been operated for family planning. 

Similarly bankers are now busy in giving certificate to GOI that they have opened the account of all villagers and the authorities responsible for issue of Adhar card are busy in same exercise to befool either the GOI or the people of India or inviting new chain of problems in the same way as after emergency people of India came to know the pain of excesses committed during and before emergency period to achieve various targets. 

Illiterate and unskilled villagers of the villages are first appointed Business Correspondents by public sector banks and it is they who are completing the work of filling up application forms for opening of savings account  . None of the officer of the bank have time to verify the genuineness of person, his signature , his address etc as used to be done in normal cases. 

Bankers and GOI, both have decided to ignore completely the principles of 'Know Your Customer' and 'Due diligence' which they use to harp before opening of any account. I also like to point out here that our government in a hurry to issue voter cards to all voters similarly failed to stop issue of multiple card to same person or issue of card to non-existent persons or to people who are not truly Indians but migrated from neighboring countries. In the same way PAN card has been issued. And now it will not be surprising if even Adhar Card will be issued without completely all desired checks and verification  GOI has come out with so many cards but failed to give a fool proof CARD which may serve all purposes as American's citizen card can.

Wastage of money is likely to occur with opening of ATM after ATM. There are ATMs like Betal or Tea shop in every nook and corner of town even without ensuring security of ATM and that of depositors. Fraud cases are increasing by way of ATM but there is hardly any initiative taken by either banks or by GOI to stop loss or blockage of public money in various disputes. and to stop increasing number of ATM retailed public complains. I am unable to  understand how a innocent villager will be able to  resolve the issue of nonpayment of cash or short payment of cash by ATM. GOI needs to first educate them and create awareness of risk and benefits arising out of spread of ATM.

I am not negative minded person but I am not that much positive on opening of such accounts and not that much optimistic that villagers will use ATM and bankers will gain in their low cost deposit as preached by learned Finance Minister.

I am unable to understand how GOI dream of increasing GDP and create employment by using Adhar Card and by opening of Zero balance account of every villager or by keeping ATM in every nook and corner of the village.

At best leaders of ruling Congress Party can dream of gaining the heart of voters to win the next election. Bankers  will have to face problems arising out of fake accounts and  cope with gigantic numbers of cases of nonpayment or short payment to villager through ATM and they will have to sacrifice their core banking activities related to  lending and ensuring of quality lending to stop rise in bad assets.The greatest advantage to ruling Congress Party will gain after announcement of Direct Cash Transfer Scheme will be diverting the minds of common men from price rise, corruption, terrorism and crime like gangrape which shook the entire country.

Lastly success of Direct Cash Transfer of Subsidy scheme depends on

1.      Identification of families which are Below Poverty Line (BPL) and which are supposed to be real beneficiary of Direct Cash Transfer (DCT) Scheme of the government. As long as GOI do not finalize the list of BPL, there is all possibility of subsidy meant of poor misused for giving bribe to voters of ruling party. As in MANREGA scheme, beneficiary of the scheme is used to be decided by agents and political workers of the ruling party so will be case for giving DCT scheme. Political workers of the party in the village will play the pivotal role in sending and recommending the name of beneficiaries of cash subsidy as also in opening of No-frill accounts in banks.

2.    There is no full proof method in vague which can guarantee extending of cash subsidy to real poor.

3.    It is true that DCT scheme will give some alms to poor in India for their livelihood; it will prove to be too low to serve the real purpose of poverty alleviation. Real development of the area and real welfare of poor will depend on productive use of the money and creation of real job opportunities. Government will be under pressure to enhance quantum of subsidy year after after and the political parties may use the same to enrich their vote bank at the time of election. But real poverty will end only enhancing the capacity of poor to produce more and more to contribute in real GDP.

4.    Banks will have to increase lending in farm sector and for small traders as was the focus point behind nationalization of banks in 1969. It is the bitter truth that in the name of reformation banks have lent 99 percent of their available fund to corporate sector without ensuring proportionate lending for growth of agriculture. As a result of which number of billionaire in the country have gone up by a few hundred but number of poor have gone up in millions.
5.     When real income of majority of population of the country does not rise , there is no question of rise in consumption capacity of the large section of the society . When consumption capacity is weakened, the demand will be weaker and as a result the future of corporate will also be weakened. This is one of the key reasons that despite two decades of policy of reformation, liberalization and globalization in force, the growth of GDP has been falling down year after year despite all promises made by learned PM Sri Manmohan Singh and learned RBI Governor.

6.    GOI has not completed even 10 percent of task of issue of Adhar Card and hence success of DCT scheme will remain a remote possibility and at best remain confined in few districts ,selection of which will depends of whims of politicians ruling this country.A few state government has also declared that they will not implement the scheme in their state. 

UPA's Talk Show  ( Business Today ) By Sweta Puni

UPA's direct cash transfer scheme faces many challenges
Shweta Punj       Business Today  Edition: Dec 23, 2012


The United Progressive Alliance (UPA) government appears to be making just the right kind of noises before the 2014 general elections. If the easing of rules in sectors such as retail, pension and insurance were aimed at pleasing foreign investors and the corporate world, the government is now targeting the poor - its biggest vote bank - with its direct cash transfer scheme .
Quote

This (cash transfer) is a fantastic move... Things will be better than what they have been"

Bindu Ananth

President, IFMR Trust

The government aims to transfer Rs 3.2 trillion (one trillion is 100,000 crore), or $58 billion, a year to beneficiaries of its subsidy schemes and welfare programmes. The new scheme aims to plug leakages in the current subsidy regime and will cover more than half of India's population, making it the world's largest cash transfer programme. 

But there are some glaring gaps in the gargantuan scheme. 

For one, it is unclear how the government arrived at the Rs 3.2 trillion figure. The government's subsidy budget in 2012/13 is Rs 1.9 trillion. This includes food and fertiliser subsidies, which have been kept out of the cash transfer scheme for now.

The scheme is contingent upon some infrastructure issues that could take a considerable amount of time to address. Rural Development Minister Jairam Ramesh, who coined the slogan "aapka paisa aapke haath" (your money in your hands), as also Finance Minister P. Chidambaram did not spell out the most crucial contours of the scheme when they fielded questions, rather unconvincingly, at a press conference in New Delhi on November 27.

India currently has a cash transfer system where banks and post offices are used to pay old-age pensions to poor people. What the government is now talking about is a significant expansion in the scope of cash transfers. This rests on two pillars - bank accounts and the Aadhaar, or the Unique Identification (UID) Number, programme.

The bank account is the most important criterion for the cash transfers to work. But only 40 per cent of India's population has bank accounts. The current banking network does not have the bandwidth to handle more accounts, and such a network cannot be built within a month, given that the first phase of cash transfers is slated to begin in January 2013.

"Infrastructure is a big question, and if they (government) try and do it in a hurry, it can all get very messy," says Samit Ghosh, founder of Ujjivan Financial Services, a microfinance institution servicing about one million people. Ghosh says only 20 to 30 per cent of his clients have bank accounts.

Ramesh, however, argues that aanganwadi and other such workers will be used as business correspondents to disburse cash. Critics say this again will entail the involvement of middlemen and could hurt efforts to reduce pilferage and corruption.

The other pillar that the cash transfer scheme leans heavily on is the UID programme, India's monumental version of social security numbers in the US. 

The implementation of UID has been cumbersome - getting banks to rural areas and sensitizing administrators working at the grassroots level have been some of the challenges. So far, about 21 crore Aadhaar numbers have been created. This is less than a third of the number of people targeted under the cash transfer scheme.

Banks have been reluctant to come to rural areas. This is because no-frills accounts in these areas do not fit in with their business model as they lack the capability to go into rural areas.

Quote

It would be difficult to fix the monthly cash subsidies in view of fluctuation in market prices:"

Raman Singh

Chief Minister, Chhattisgarh

Problems with support systems for direct cash transfer, however, do not undermine the concept's efficacy.

"This (cash transfer) is unambiguously a fantastic move," says Bindu Ananth, who worked with ICICI Bank's microfinance division for four years and is now the President of IFMR Trust, which works on spreading the reach of financial services. "There will be apprehension but things will be better than what they have been. Subsidy transfers have been just so inefficient."

Some beneficiaries prefer cash transfers, too. One such is Geeta Das, 38, who works as a cook in Silchar, Assam, and earns about Rs 1,600 to Rs 1,700 a month. She has been trying to get a ration card for 12 years since her husband's death, and depends on her mother, who holds a ration card, to get subsidised food. "Cash is good because sometimes we do not get our quota of ration and the quality of food is often poor," says Das.

But not everyone is convinced. Some state leaders have voiced their concerns about the scheme. In a letter to Prime Minister Manmohan Singh, Chhattisgarh Chief Minister Raman Singh has said financial inclusion and availability of information technology infrastructure are preconditions to cash transfer and there are substantial problems in the state on both accounts. "It would also be difficult to fix the monthly cash subsidies in view of fluctuation in market prices."

No doubt, the Centre has embarked on an ambitious journey. The danger lies in setting unrealistic deadlines driven by expediency and tarnishing an important reform in the process. The UPA would surely be hoping that, in the 2014 poll, the scheme figures as prominently as the rural job guarantee programme did in the 2009 elections.

http://businesstoday.intoday.in/story/direct-cash-transfer-faces-many-implementation-challenges/1/190407.html

Cash transfer scheme: BJP accuses government of 'fooling' people

NEW DELHI: BJP today accused the government of "fooling" the people by hurriedly implementing the cash transfer scheme without issuing Aadhaar cards to all the intended beneficiaries and creating an environment of confusion.

"In 2012, the government's own gameplan has been spoiled and yet it is calling this cash transfer scheme a gamechanger. The scheme is only being implemented in some districts. Moreover, the opinion within the government itself is divided on who falls under the BPL category," BJP spokesperson Shahnawaz Hussain told reporters here.

The main opposition maintained that the first priority for the government should be to grapple with price rise, falling GDP and rampant corruption.

The government earlier today announced that the cash transfer scheme will be implemented in 20 districts initially starting from January 1. There will be no cash transfer for the subsidy on food, kerosene, diesel and fertiliser.

"The government says cash subsidy will be given to BPL families but most such families do not have a bank account. Bank managers have only now been asked to help them open their accounts. Aadhaar cards have not been made for a large number of people," the party spokesperson said.

Aadhaar unique identity cards will be the basis for the cash transfer programme.

"Today Congress is not even in the game but is calling this scheme a gamechanger. The government is only trying to create an environment of confusion. It is only fooling the people through this scheme," Hussain alleged.

At the same time, BJP clarified that it is not against the scheme per se and said that its only grievance is that it is not being implemented properly.

"Time will only tell how successful this scheme will be," Hussain said.



Direct cash transfer programme: PSBs to open 5,000 ATMs in 51 districts

NEW DELHI: State-run banks are set to ring in the new year by rolling out 5,000 ATMs, following the government's directive to make available this facility in the 51 districts selected for the launch of the direct cash transfer programme.

The Centre's ambitious programme, which aims to provide benefits under 34 welfare schemes directly into beneficiaries' accounts so as to plug leakages and reduce delays in transfer of subsidies, is set to be rolled out on January 1.

"Once the scheme kicks in, there will be a huge load on the banks as beneficiaries will like to withdraw money and also do other transactions. ATMs will facilitate this and lessen the burden on the banks," said a finance ministry official, who did not wish to be named.

State-run banks, which had 34,916 onsite ATMs till September, are also working on providing 2 million point of sale, or POS, terminals across the country to allow customers to carry out small and medium-sized transactions.

"Cash transfer is just one step. We want that all beneficiaries should be able to utilise other banking services. It is a win-win situation as banks will also get low-cost deposits from such account holders," the official said.

In order to facilitate payments, these banks will continue to use the existing payment module, which allows interbank payments. According to a government official, the finance ministry has conveyed to the Prime Minister's Office that the complete switch to the Aadhaarbased payment system can happen later. "Once the Aadhaar numbers reach a significant scale, the technology issues can be worked out to achieve a convergence of the two models," the official said.

The Unique Identification Authority, which issues Aadhaar identity cards, plans to set up 10 million micro-ATMs, each at a cost of about Rs 15,000 while the network will cost about Rs 1,500 crore. Bankers say that the focus should remain on opening more accounts rather than the technology used to provide services. At present, 58.7% Indian households avail banking facilities.

"Unless the UIDAI achieves significant numbers, transferring to a new technology will be a loss-making proposition for us," said an executive director at a public sector bank.

The government has directed banks to have at least one branch or business correspondent agents (BCA) for every village or group of villages with 1,000 to 1,500 households. In addition, the government plans to set up camps in educational institutions and villages to speed up enrolment of beneficiaries under the direct cash transfer scheme.

In areas where there is no functioning BCA or the BCA's performance is less than satisfactory, the common service centres set up under the department of information technology are to be engaged as BCA.


Wish You Happy New Year 2013


Forget discomfort of the year 2012, take lesson from the mistakes of the year 2012 and prepare for making the year 2013 full of comforts .

I beg excuse for mistakes committed by me willingly or unwillingly knowingly or unknowingly during the year ending this midnight. 

I hope you will help me in making coming year 2012 better than the year passing away.

I Wish Best and happy and prosperous and brightest and joyful and pleasant new year 2013 for you , for your family , for your friends and relatives and for your all near and dear--------Danendra jain


अरुण मित्तल 'अद्भुत' की इन पंक्तियों के साथ
आपको मेरी ओर से नव वर्ष 2013 की हार्दिक शुभकामनाएं

खुशियों भरा संसार दे, नव वर्ष की पहली किरण
आनंद का उपहार दे, नव वर्ष की पहली किरण
दुनिया की अंधी दौड़ में, कुछ दिल्लगी के पल मिले
सबको ही अनुपम प्यार दें, नव वर्ष की पहली किरण

जर्जर हुए बदले अधर, नव वर्ष की पहली किरण
नव चेतना, दे नया स्वर, नव वर्ष की पहली किरण
अब आ चढ़ें नव कर्म रथ पर हर चिरंतन साधना
इस बुद्धि को कर दे प्रखर, नव वर्ष की पहली किरण

सबको अटल विश्वास दे, नव वर्ष की पहली किरण
नव देह में नव श्वास दे, नव वर्ष की पहली किरण
इस अवनि तल पर उतरकर, अब कर दे रौशन ये फिज़ा
उल्लास ही उल्लास दे, नव वर्ष की पहली किरण

अब आ रही है मनोरम, नव वर्ष की पहली किरण
यह चीरती अज्ञान तम, नव वर्ष की पहली किरण
मैं छंद तुझ पर क्या लिखूँ 'अद्भुत' कहूँ इतना ही बस।
सुस्वागतम सुस्वागतम, नव वर्ष की पहली किरण

Sunday, December 30, 2012

RBI Now Feel Necessity of Price Control in Banks

RBI cautions banks charging high prices on products
Times of India

CHENNAI: Cautioning banks charging high prices on products offered to customers, Reserve Bank deputy governor K C Chakrabarty today said a new set of guidelines would be announced during the coming Ombudsman Conference in Mumbai. 

"I am telling you that if you believe that the pricing has become exploratory then we will intervene. We have intervened in the case of micro-finance institutions. What I am saying is, discriminatory pricing (on products offered to customers) should not be there. Pricing should be non-discriminatory," Chakrabarty told reporters here. 

During the Ombudsman Conference, to be chaired by RBI Governor D Subbarao, on January 4, new guidelines would be announced. "Some new guidelines will come on how it (RBI) can be more stringent in pricing the products to customers of banks", he said. 
"You (banks) have to understand the customer needs and be reasonable to customers," he said, adding, "do not do lip service" . 

Observing that banks charge high interest rates for offering educational loans compared to home loans, he said "I am only raising a question why it cannot be reduced." 

Earlier, after releasing a book 'Indian Banking Reforms and After', written by banker Dharmalingam Venugopal, also Indian Overseas Bank employee, Chakrabarty said banks need to ensure that they maintain high level of productivity and efficiency in their operations. 

"While profit margins are important for sustaining banking operations, the cost of operational inefficiencies of banks should not be passed on to customers by way of higher service charges and fees," he warned. 

On restructuring of loans by banks offered to individuals and enterprises, he said an element of discrimination was practiced by the banks in restructuring of loans. 

"Analysis of available data indicates that the larger borrowers have invariably received benefit of restructuring of their loans, while the restructuring in case of SMEs has remained low. I believe with a timely intervention and support from the banks, this sector would have definitely shown much lower levels of impaired assets than it does", he said. 

Stating that business operations of banks should be "customer-centric" in nature, Chakrabarty said, "this should be reflected in all aspects of banking operations including creation of customised products and services". 

To a query on the Union Government's proposal to roll out cash-transfer scheme from January one, 2013, he said, "we were asking (banks) to do it for more than two years. Now, it has encouraged the government to come out with this particular scheme". 

"Now everybody has a bank account and if the money is credited into the account, it can stop the leakages. It will also make the financial inclusion more effective. I am telling them (banks) for the last three years as part of their normal business, but now they (banks) are forced to do." he said.
http://timesofindia.indiatimes.com/business/india-business/RBI-cautions-banks-charging-high-prices-on-products/articleshow/17820694.cms

Sooner or the later, GOI will have to frame uniform interest rate structure conducive for growth in savings and growth in capacity of banks to lend more and more in agriculture and manufacturing sector. Efforts of Government to distribute cash subsidy to poor may enrich their vote bank for a short period but in the long run this dirty policy will turn the poor as beggar and they will develop a habit of not working but depending on alms they will receive freely from politicians.

To Read further you may click on following link

http://dkjain497091112006.blogspot.in/2012/12/liquidity-crisis-in-banks-is-creation.html

SATURDAY, OCTOBER 20, 2012


Bad Assets Rising Despite Recovery Claimed BY Bankers


Most of Public Sector Banks have booked less profit and more Non Performing Assets this year barring some exceptions who could get success in manipulating data of the bank. Bank has still huge volume of bad assets but hidden in the system. 

Clever and so called best bankers are those who can conceal bad assets by methods of restructuring and rephasing.
To Read further you may click on following link

SATURDAY, OCTOBER 29, 2011


Interest Rate in Banks

The war continues among banks on interest rate. After nationalization of banks in 1969, RBI used to decide rate structure for deposits and for lending uniformly applicable for all banks. But after adoption of reformation policy in the year 1991, RBI freed lending rates excepting loans upto Rs.2.00 lacs. In the name of competition, banks started rate war to attract high profile customers into their fold. Social banking concept and mass banking approach initiated through nationalization of banks have now become the history.
To Read further you may click on following link

http://dkjain497091112006.blogspot.in/2011/10/interest-rate-in-banks.html

WEDNESDAY, APRIL 18, 2012


Government Dictates Rates to PSU Banks


Centre turning dictator? Government orders PSU banks to cut rates immediately

To Read further you may click on following link


SATURDAY, APRIL 28, 2012


Should RBI Decide Unioform Interest Rate Structure



The war continues among banks on interest rate. After nationalization of banks in 1969, RBI used to decide rate structure for deposits and for lending uniformly applicable for all banks. But after adoption of reformation policy in the year 1991, RBI freed lending rates excepting loans upto Rs.2.00 lacs. In the name of competition, banks started rate war to attract high profile customers into their fold. Social banking concept and mass banking approach initiated through nationalization of banks have now become the history.
To Read further you may click on following link




Asset Quality of Public Sector Banks Cannot Improve Without Change in Attitude


Asset quality of Indian Banks: A default line for Basel III (Business Line 31.12.2012)

Recognising that “asset quality of banks reflects the efficacy of banks’ credit risk management and the recovery environment”, the latest RBI report on ‘Trend and Progress of Banking in India (2011-12)’ paints a grim picture on the constitution and trend of asset quality confronting Indian banks.
Based on annual accounts and off-site data, the report highlights deterioration in all key diagnostics, that is, gross NPA (non-performing assets), net NPA and slippage ratios (fresh gross NPAs as a fraction of opening gross standard advances).
Public sector banks’ gross NPA ratio alone rose by 90 basis points in the last fiscal. This was partially offset by improved performance by foreign and private sector banks, resulting in an overall deterioration of 60 basis points for the commercial banking system as a whole.
Furthermore, fiscal 2011-12 has seen the slowest rate of growth in aggregate loans and advances at 17.4 per cent against 22.3 per cent in 2010-11 and 19.6 per cent in 2009-10.
In fact, the five year trajectory of growth in gross advances and gross NPAs reveals a widening adverse gap. These developments are increasingly worrisome, given continued macro headwinds, impending Basel III capital requirements and an already constrained fiscal position.
The RBI has clearly indicated that asset quality deterioration is a “default line” and the banking system should not rely on “misplaced comfort” in this regard.
Contrary to public perception, the pronounced deterioration in asset quality of public sector banks is driven by the non-priority sector. In 2011-12, this sector’s share in NPAs jumped from 48 per cent to 53 per cent, while the contribution of the agricultural, SME and other priority sectors has remained stagnant or marginally dipped.

DRIVING FACTORS

The cyclical factors pertain to the prolonged domestic slowdown coupled with global recessionary conditions. The structural and institutional factors emanate from lack of adequate due diligence in credit appraisal during the boom period of 2003-07, institutional rigidities relating to debt recovery and post sanction loan monitoring.
What is not directly quantifiable is how much of the jump in the current gross NPA ratio is driven by the “one-time” dispensation announced in 2008-09 whereby banks were allowed to restructure sub-standard assets and report them as standard.
While this helped banks report better than actual gross NPA ratios in 2008-09 and 2009-10, in the hope of buying time, the prolonged slowdown may well be contributing now to an acceleration in NPA conversion from the dispensation bucket. Two ominous data points are evident from the report.
First, the ratio of restructured to gross advances is at a five-year post-Lehman high of 5 per cent for the system as a whole. This ratio has significantly deteriorated for non SBI nationalised banks and has jumped 250 basis points in the last one year. It is now perched at a long term high of 6.9 per cent. Second, the slippage ratio is also at a five-year high of 2.5 per cent.
It may be recalled that in the 2010-11 report, the RBI estimated that with a 25 per cent conversion rate to NPAs from the 2008-09 dispensation bucket, the gross NPA ratio for the commercial banking system would have hit 3.01 per cent by March 2011 (as against the then reported GNPA of 2.5 per cent). A year later, as at March 2012, we are now at 3.10 per cent. In the absence of disaggregated data, one can only speculate.

POLICY OPTIONS

The concern is that new accruals to NPAs have been faster than reduction in existing NPAs due to lower levels of up-gradation and recoveries. This is in fact a vicious cycle which has the potential to accelerate systemic risk.
The RBI recognises the need for “countercyclical prudential regulatory policy and further strengthening by basing it on more systematic and rule-based footing.” A few policy options are in order.
First, tighter credit risk standards, robust surveillance and post sanction monitoring of bank lending to mitigate further adverse effects are an immediate necessity.
Second, close monitoring of net NPA ratios to ensure there is no let-up on provisioning. Both these options require significant policy and political will in the near term.
Third, implementation of dynamic loan loss provisioning in line with global approaches to stabilising the financial system merits serious consideration. This would mean a calibrated move towards a formal system of counter-cyclical provisioning in India, based on expected long period credit losses.
However, the success of such a system depends on reliability of accounting data, robust disaggregated loan loss history and an ability to get cyclical projections right. While each of these is important in itself, this last factor could yet prove to be the Achilles heel.
Already, worldwide, subjective assessments on the duration and depth of cyclical downturns are being challenged to the hilt. Considerable thought will need to be invested to ensure that models allow for sufficiently higher provisioning during cyclical upturns, which in turn, match actual NPA levels as closely as possible, in a prolonged and vicious downturn, such as the one we face now. We have the benefit of recent experience to learn from.
A recent IMF working paper on ‘Bank Asset Quality in Emerging Markets’ finds strong linkages between macroeconomic aggregates such as growth slowdown, weaker terms of trade and rapid credit growth on the one hand, and higher NPA levels on the other. This is intuitive and easy to understand. What is worrying however is the finding that “economic growth falls significantly after structural shocks that drive non-performing loans higher or generate a credit contraction.” This is the feedback loop from the financial sector to the real sector. Given the recent debate on the true state of asset quality in the Indian banking system, urgent measures are required to ensure that India stays the course in the run-up to Basel III implementation.
The authors are professors at S. P. Jain Institute of Management and Research, Mumbai

Public sector banks must improve ability to assess risks, says K.C. Chakrabarty

Public sector banks should significantly improve their allocational and operational efficiency and delivery models — the message came across clearly from K.C. Chakrabarty, Deputy Governor of Reserve Bank of India.
Releasing a book, Indian Banking Reforms and After: A Bank Economist’s Take, authored by Dharmalingam Venugopal, Assistant General Manager, Indian Overseas Bank, here on Sunday, he said public sector banks must learn to manage their non-performing assets more efficiently. The banks have forgotten the art of saying ‘no’, except to small borrowers. In reality, NPAs are because of big loans. “How come, all NPAs come to public sector banks,” he wondered. Private sector banks are doing better in this respect. Public sector banks must significantly improve their risk assessment capability. “You must learn to identify the good and bad customers and lend accordingly,” he said.

LOAN REJIG

On the loan restructuring front, he said, the discrimination by banks is unfair. While a large number of “big borrowers” invariably receive the benefit of restructuring of loans, the number of small and medium enterprises or farmers who get their loans restructured is abysmally low.
On financial inclusion, he said that despite several steps taken by the Government and the RBI, the extent of exclusion in the Indian financial system continues to be unacceptably high. Citing the example of Kerala, which is said have achieved 100 per cent financial inclusion, he said if financial inclusion is achieved in the State, why should there be so many gold-loan companies and private lenders. Banks should approach people with complete financial services, not just credit or deposit alone.
The assessment of the progress in financial inclusion shows that while there has been a considerable progress in the number of accounts opened, the actual number of transactions per account continues to be extremely low. This reduces the viability of the financial inclusion efforts, he said, asking banks to address this issue on a priority basis.
Lauding the author of the book, Venugopal, for his contribution to financial inclusion of the primitive tribes of the Nilgiris district in Tamil Nadu, he said, “we need more such people with a genuine passion for financial inclusion”.
Earlier, introducing Venugopal and his book to the audience, M. Narendra, Chairman and Managing Director of Indian Overseas Bank, explained how he identified him, and realising the need for such a shrewd economist at the headquarters, brought him to the Chairman’s Secretariat.

PUBLIC SECTOR BANKS IN CRISIS


READ MY VIEWS ON FOLLOWING ARTICLE JUST AFTER THE END OF THIS ARTICLE.WHICH IS WRITTEN BY LEARNED HIMADRI SHEKHAR BHATTACHARYA

PSU BANK EMPLOYEES IN INDIA—“LEAVING UNDER DEMOCLES SWORD”

Banking in any country irrespective of its status, form is considered as backbone of economy. Core activities of banks are to accept deposits from public, institution etc. to channelize the fund for growth of individual, society and our country.
With advent of globalization banking industry has spread its wings far and wide not only in its core business but also in plethora of other businesses, incidental to it like dealing in insurance ,mutual fund ,forex , share market, to name a few.
To read Further you may click on following link 

SATURDAY, NOVEMBER 19, 2011


Treat Customers as GOD and staff as DOG

When politics is good and political leaders are good, there is no doubt that governance is good and administration is good. If politics is dirty and political leaders are dishonest, bankers will also be dishonest and corrupt and in such position there is no fun in talking of ideals on this forum.

Politics and banks are inter-related to each other. All top leaders are indulged in flattery of political leaders. Will u please agree on bitter truth and ground reality? Junior officers are busy more in keeping their bosses happy than in keeping their safe and making it stronger and shining like Diamond. 

To read Further you may click on following link 
http://dkjain4970901092007.blogspot.in/2011/11/treat-customers-as-god-and-staff-as-dog.html

MONDAY, DECEMBER 03, 2012


NPA In Banks Cannot Come Down Until Improvement IN HR Policy

S Ravindranath: Dark clouds for India's public-sector banks
The next few quarters will be equally turbulent for PSBs. Maintaining profitability and containing NPA levels will be severely challenging
S Ravindranath / Dec 02, 2012, 00:35 IST


By now, all of India’s banks have published their unaudited but limited review financial results for the quarter/half-year ending September 30. They clearly indicate that all is not quite sanguine with the banking industry, particularly for public-sector banks (PSBs).
To read Further you may click on following link 

http://dkjain497091112006.blogspot.in/2012/12/npa-in-banks-cannot-come-down-until.html

SATURDAY, MARCH 10, 2012


Public and Private Sector Banks



Reality of stimulus package is now visible; Fiscal deficit is increasing , trade deficit is increasing, current account deficit is increasing and GDP is coming down, IIP figure is coming down, rating of banks is coming down rating of country is at alarming position and so on ….Borrowing by government has been consistently increasing, public debt has reached to the level of 46 lac crores i.e. around 40% of GDP. Still government is allowing one after other subsidies to big corporates, exporters and importers. 
To read Further you may click on following link 

TUESDAY, DECEMBER 25, 2012


Future of Public Sector Banks


 Risky futures that banks Should Avoid
To read Further you may click on following link 

Saturday, December 29, 2012

RBI Postpones Basle III To Help Sick Banks

RBI postpones Basel-III rollout to April 1
Gives banks more time on tier-1 capital says it's noting implementation progress elsewhereThe Reserve Bank of India ( RBI) has rescheduled the start date for implementation of Basel-III financial norms to April 1, instead of January 1, it announced today.

Their circular came on a day when some public sector banks had withdrawn their perpetual bond issuances, as these would not qualify as tier-1 capital in the Basel-III regime. As a result, banks will have more time on this.

RBI said it would closely monitor the progress on Basel-III implementation in other countries, particularly in the major ones which are members of the Basel Committee on Banking Supervision (BCBS).


In May, it had issued guidelines on implementation of Basel-III capital regulation. These were to be implemented from January 1 and to be fully in place as on March 31, 2018.

The commencement date was kept as January 1, though the government’s financial year begins on April 1, given the global implementation schedule agreed to by the BCBS. Postponement gives banks more time on perpetual bonds. Tier-1 capital is the core measure of a bank’s financial strength from a regulator’s point of view. Under Basel-III, equity capital and retained earnings are the predominant form of tier-1 capital and perpetual bonds do not qualify.

Corporation Bank and Indian Overseas Bank were planning to raise Rs 200 crore and Rs 800 crore, respectively, in December by way of perpetual bonds. They’d withdrawn these issues for December but can now raise these till March 31.

BCBS, on December 14, observed that 11 members had published the final set of Basel-III regulations effective from the start date of January 1 — Australia, Canada, China, Hong Kong, India, Japan, Mexico, Saudi Arabia, Singapore, South Africa and Switzerland. Seven other jurisdictions, including the European Union and America, had issued draft regulations and indicated they were working towards issuing final versions as quickly as possible.

The Committee further observed, “The globally agreed timeline includes a number of milestones from 2013 to 2019, designed to provide for a gradual phasing in of the new capital requirements. It is expected that as remaining jurisdictions finalise their domestic regulations during 2013, they will incorporate all the remaining transitional deadlines in line with the original global agreement, even where they have not been able to meet the January 1 start date. Hence, by the end of 2013, almost all Basel Committee jurisdictions will be implementing Basel-III, in accordance with the agreed timetable. This is an absolutely critical step towards strengthening the resilience of the global banking system.”
http://www.business-standard.com/india/news/rbi-postpones-basel-iii-rollout-to-april-1/497078/

Mobile Banking Popularity Gains


Chart: Transactions Vs Amount Using Mobile Banking In India During Aug 2011- Oct 2012

The number of transactions using mobile banking in India has increased by 123.9% while the amount has increased by 470.88% taking into consideration the period from from August 2011 and October 2012.
Note that we had previously reported that the number of transactions using mobile banking in India had increased by 68.86% while the amount had increased by 102.65% taking into consideration the period from August 2011 to May 2012. Taking this into account, the number of transactions has increased by 32.58%  for the period between May 2012 to October 2012 while the amount has increased by 171.88% during the same period.
The average amount per transaction stood at Rs 1755.66, more than double of Rs 731.83 reported in May 2012, though we believe that the transaction information shared by the RBI with us includes both payment and non payment related transactions.
Some Observations -
- As of October 2012, the total number of mobile banking transactions stood at 44,37,342 while the amount transacted was at Rs 77904.72 lakhs. In comparison, the total number of mobile banking transactions was at 33,46,743 while the amount transacted was at Rs 28,654.54 lakhs as of May 2012.
- There was a significant jump in October 2012 from September 2012, with respect to both the number of transactions and the amount transacted. While the number of transactions increased by 13.85% during the month, the amount transacted increased by 89.8% during the same period.
- There was another significant jump in March 2012 from February 2012, with respect to both the number of transactions and the amount transacted. While the number of transactions increased by 11.55% during the month, the amount transacted increased by 18.61% during the same period.
- August 2011 saw Rs 13646.43 lakhs being transacted – the lowest amount transacted during this period, while October 2012 saw Rs 77904.72 lakhs being transacted – the maximum amount being transacted during this period.