Monday, June 22, 2009

Banks take long duration for reimbursement in case of ATMs fault

In case you insert your debit card in an ATM for cash withdrawal but the cash is not dispensed yet the transaction gets debited in your bank account then as per Reserve Bank of India norms, banks should refund such wrongly debited amount within 12 working days. However in reality the process generally takes longer durations if the card has been used at other bank ATM.

A senior banking ombudsman official informed, "Sticking to the 12-day deadline become difficult because there are two banks involved here. Reimbursement may take up to three weeks.'' Most important the official said the amount does not get automatically reaccredited; the customer has to first log a complaint.

Since April the customers has been allowed to use the automated teller machines freely to draw cash from all ATMs across banks without paying any extra charge. After this two problems have risen. One is delay in the reimbursement of wrongly debited amounts and the second is rejection of a card at the ATM of another bank because its software fails to recognize the `foreign' card.

However a senior Mumbai banker, assured, "Initial glitches would be smoothened out once banks change their software (to meet the new requirements)”.

Sanjeev Talwar, banking advisor at the Delhi-headquartered National Consumer Helpline pointed out the problem was severe during April when customers were allowed to use all ATMs across the banks free of charge. Whereas the senior bankers in Mumbai and Delhi informed now the problems aren't as severe anymore, though they have not been eliminated.

In February a consumer-friendly circular on reimbursement from RBI, which pre-dates freeing of ATMs in April, says, "...we have been receiving a number of complaints from bank customers, regarding debit of accounts even though the ATMs have not disbursed cash for various reasons. More importantly, banks take considerable time in reimbursing the amounts involved in such failed transactions to card holders. In many cases, the time taken is as much as 50 days.''

The ombudsman official stated to meet RBI-mandated deadline, "We have asked nodal officers of each bank to work in close cooperation with others to allow for quicker reimbursement.''

Bankers informed faulty ATM transactions can involve connectivity problems. The ombudsman official explained, "When a card is physically present in the ATM, the churn of printing roll is generated, and when there is any transaction, it hits a switch centre and reconciliation of the transaction takes place. If these two proofs are produced, it shows the transaction actually took place.'' But in cases where money is not dispensed, the official added, "We rely on the cash reconciliation statement. Every day or two, the cash which has been put inside the ATM is tallied with what has been actually dispensed. If cash doesn't come out, surplus money would be found in the statement. We take a decision (in a dispute) based on these three things.''

The customers who have to wait longer than 12 days are directed to speak to RBI's customer care department with their complaint.

Wednesday, June 17, 2009

OBC, Canara to reduce lending rates shortly

Soon Bangalore-based Canara Bank and Delhi-based Oriental Bank of Commerce (OBC) will be reducing lending rates. By the end of this month Canara Bank will be reviewing the present lending rates and OBC will be deciding early next month.

While speaking on the sidelines of a news conference in the New Delhi Canara Bank chairman and managing director A C Mahajan told reporters, “Interest rates are moving southwards and likely to come down further. Our asset liability committee (Alco) is meeting at the end of this month and we would be taking a call on further rate cut thereafter”.

Alok Mishra, chairman and managing director of OBC agreed with Mahajan’s views. Mishra stated, “Rates are definitely moving downwards. Our Alco would be meeting in the first week of next month and rates may soften after the meeting”.

But both A C Mahajan and Alok Mishra remained reserved regarding the possible quantum of revision in the interest rates, while admitting that cost of funds is still a cause of concern. Mahajan added, “Cost of funds are still high and it remains the biggest hurdle in the way of reducing interest rates”.

Currently the prime lending rates (PLR) of both Canara Bank and OBC are 12 per cent.

In the recent meeting with chiefs of all the public sector banks finance minister Pranab Mukerjee had suggested them to avail the benefit of various monetary measures taken by RBI and should pass them on to customers.

After the meeting with the finance minister, most banks have given indications that they will think of revising interest rates. Banks have also indicated that to reduce the lending rates, deposits rates have to be reduced.

Meanwhile the State Bank of India, the country’s largest commercial bank, has already reduced deposits rates by 25 basis points on all maturities.

On the other hand Canara Bank is ready to acquire a bank in India in order to increase its size and presence. Mahajan stated, “Consolidation is the only way to grow and we are willing to takeover (a bank). If there is any good opportunity, we would grab it with both hands”.

The statement supposes to be significant as finance minister Pranab Mukherjee in a meeting with senior bankers had said, that the government would support consolidation provided the banks have to take the initiative. Apart from SBI, no major bank has shown any liking for consolidation in the banking industry.

Last year State Bank of Saurashtra had merged with SBI and a process for the remaining six subsidiaries would be finalized by July-end.

The newly-appointed deputy governor of RBI, K C Chakrabarty, had firmly pointed out that time is not over for consolidation in the banking industry. “Banks can grow on their own for the time being and the right time for moving towards consolidation would come only after 3-4 years.”

Banks likely to reduce rates over the next few weeks

After the finance minister Pranab Mukherjee direction to the banks to cut interest rates they are likely to cut interest rates by 100-150 basis points over the next few weeks to boost credit growth. However the finance minister had already directed public sector banks to cut lending rates further. Although the Reserve Bank of India had reduced its benchmark rates, Mukherjee said this is not being reflected in loans.

While according to most bankers, including RBI deputy governor K.C. Chakrabarty, there will be no drastic reduction in interest rates in the long term, although in the short term they will remain benevolent.

Alok K. Misra, chairman and managing director of the Oriental Bank of Commerce told The Telegraph, “Interest rates are doing a downward spiral. We will take a call on the quantum of rate cut by the end of June when the asset liability committee meets.”

Most of the PSU banks are lending at 11.75-12.25 per cent but Delhi-based Punjab National Bank is lending at the lowest rate of 11 per cent, while the private banks such as ICICI Bank, HDFC Bank and Axis Bank is lending at 12.75-16 per cent.

Rana Kapoor, managing director of Yes Bank informed that his bank will reduce its benchmark lending rate by 50 basis points from July. Largely banks might reduce rates by 1-1.5 per cent over the next few weeks.

Last week after the meeting of bank chiefs and finance minister the State Bank of India said there is scope for a 25-basis point cut.

According to senior bankers the softening of interest rates can help in reviving the drooping demand in credit growth.

Canara Bank will be announcing a cut in its prime lending rates by June end has reworked its loan growth target to around 21-22 per cent during the current fiscal as compared with 29 per cent in the last fiscal. Canara Bank chairman A.C. Mahajan pointed out, “While there is sufficient liquidity in the system, the credit off take has not been very high”.