Friday, May 28, 2010

PMO not in favor of FinMin proposal on bank chief appointments

Finance Ministry has put forward a proposal that the bankers whose remaining service is less than two years should be taken into consideration for the appointment as public sector bank chiefs, but the Prime Minister’s Office (PMO) has rejected this proposal. It said, with such move several candidates who are in the list for top posts of banks will be affected.

According to sources closely related to the development, PMO is happy with the intensity of appointment norms which have worked well for several years and have helped in the re-emergence of public sector banks as strong players in the banking industry.

The sources added that individuals left with less than two years of service will not get enough time to implement their decisions properly.

Meanwhile the finance ministry on the basis of feedback received from South Block, prepared a fresh set of names and sent to the Appointments Committee of Cabinet (ACC).

However PMO’s objections has come at a time when some lawmakers have written to Finance Minister Pranab Mukherjee in which they have expressed concern over the proposal to allow executive directors left with 18 months of service to be considered for appointment as bank chiefs. The members of Parliament said the decision is being taken unilaterally by the finance ministry and ACC’s approval is not taken.

They added however, since 2007 the government has been following ad-hocism in appointment of bank chiefs instead of following a uniform set of rules. Also, the government has been frequently changing norms for the candidates who were interviewed in February. The changes were done so frequently that some candidates from State Bank of India, who were called for the meeting, were dropped at the last moment.

Now, the intervention by PMO will break a long tradition of appointment of chairmen of government banks. Generally appointments in big banks are done through lateral process, i.e. the chairman of a smaller bank is appointed chief of big bank. But, for Canara Bank’s top job, the government has decided to appoint the existing executive director because present chairmen of smaller banks do not meet the two criterions, first, two years of residual service and second is, one-year experience as chairman of a smaller bank.

However Union Bank’s S Raman is listed to take charge of Canara Bank when the present chief, A C Mahajan, will be retiring in July. On the other hand, for six large banks, Punjab National, Bank of Baroda, Canara Bank, Bank of India, Union Bank of India and Central Bank of India, the top positions will be filled through lateral process.

According to sources, for meantime, the finance ministry has taken consent for eight candidates to be appointed in as many number of banks where top positions will be vacant till February next year.

Besides, Canara Bank, the government wants consent for the candidates for the appointment as chiefs of Corporation Bank, Andhra Bank, Indian Overseas Bank, UCO Bank, Oriental Bank of Commerce, Bank of Maharashtra and Vijaya Bank. The position in Vijaya Bank will be vacant in February, but the top posts in seven other banks will be vacated in 2010.

The government also wants consent from 11 general managers for the appointment of executive directors in nine banks.

Thursday, May 27, 2010

Dena Bank opens first only women staff branch in Raipur

Dena Bank has opened its first branch having only women staff, in Raipur, the capital of Chhattisgarh. Bank sources said opening of this branch is a part of its program to empower women, and this will be the first all-women branch in Chhattisgarh and Madhya Pradesh.

Shyam Lal (name changed) who stands outside the bank branch with his double-barrelled gun is the only male staff in this branch. In this tiny branch of five people in Raipur’s Sunder Nagar all are women right from the peon to the branch manager.

At present the branch has less than 100 account holders and soon the number is expected to increase as more and more women will be interested in opening a bank account in this branch. Manju Agrawal, who has opened an account in this branch said, “A woman customer can express her views more liberally and seek information more easily from women staffers.”

According to her women employees can understand the sentiments of women customers more accurately, which will help in addressing their grievances effectively.

However there are male customers also but women think they can make this unique branch their own.

Since its opening, the branch has become the centre of attention; many people are visiting curiously to see how women can run an operation all by themselves. Due to this reason Shyam Lal, who refused to reveal his real name, makes sure to provide maximum security to the staff. He always frisks men from entering the branch and menacingly bars the way if anyone approaches the branch manager’s office.

Although Dena Bank has handed over the complete operational command in the hands of women in the branch, but women staff does not have permission to speak to the media. “Sorry, I do not have permission to speak and give information about the branch,” says manager Manju Dheewar.

Even senior executives are avoiding talking about it. “Yes, it is an innovative step, but the details will be given only by my superiors in the corporate office,” says Rohit Yadav, the bank’s regional manager.

Such silence is odd as sources in the bank’s corporate office in Mumbai say the idea of an all-women branch was given by the local officials and was given practical shape from the fact that the region had large number of women employees.

A senior executive pointed out at present the concept of an all-women branch has been started on an experimental basis, and if it succeeds, the management might introduce it in other branches too.

The women staff in the new Raipur branch is happy about the fact that the management is thinking on such lines. There are also plans of hiring a “gun-woman” instead of a “gun-man” to guard the branch

Wednesday, May 26, 2010

PSU banks to re-introduce common entrance exam for officers and employees

The system of common entrance tests for officers and employees is likely to be re-introduced. State-owned banks are thinking on this move as it will help lenders in standardizing recruitment process and fill up vacancies faster.

"We are working together with the Indian Banks' Association (IBA) to have a common exam for the entry level officers and clerks," Institute of Banking Personnel Selection (IBPS) Director M Balachandran told PTI.

The institute is promoted by PSU banks and the Reserve Bank, provides assistance to the financial sector in activities of employee selection, promotion and placement.

Previously region-wise selection of entry level bank officers was done through Banking Services Recruitment Board (BSRB), but few years ago after computerization requirements of banks came down, thus it was discontinued.

Earlier in 1978, BSRBs were established which had a uniform standard and eligibility criterion for recruitment of personnel’s including clerks.

According to Indian Bank Chairman and Managing Director T M Bhasin, "IBA and IBPS are working on some half yearly exam system to create a talent pool for the sector."

This will enable in standardization of educational qualification and examination system and they will form a panel. He said, for the recruitment of officers there will be an all India panel and for workmen a state level panel.

Bhasin said IBA has circulated the scheme to the banks and asked for their suggestions and added, individual banks can recruit senior or specialized officers.

A senior bank official pointed out due to branch expansion by various lenders, business growth and aggressive marketing, large number of employment opportunities have come up.

Currently there are 27 public sector banks including six associate banks of State Bank of India (SBI).

But the State Bank of India and its associates conduct their own exam and have different service conditions and benefits from other public sector banks.

SBI is planning to hire about 27,000 people this year to fill vacancies across different divisions.

"This year we have plans to recruit 20,000-22,000 people in the clerical posts and 5,500 people at the probationary officer level," SBI Deputy Managing Director and Group Executive Anup Banerji had said a few months ago.

Banerji told SBI is planning to enhance its n rural operations for this it will be deploying 2,000 probationary officers in rural areas.

Tuesday, May 25, 2010

Kudumbashree collective farming units to get zero-percent interest loans

Banks will give zero-percent interest Joint Liability Group (JLG) loans to collective farming units under the Neighborhood Groups (NHGs) of the Kudumbashree. This new scheme will made available shortly to the units. The work on new scheme at Kudumbashree units has already started.

To get the unique benefit of the zero-percent interest loan scheme, the collective farming units have to qualify as Joint Liability Groups (JLGs) and NHGs, under the linkage loan scheme.

Under this scheme the collective farming units will be given loan at 9 percent interest. The banks which have joined the scheme include Canara Bank, Union Bank of India, State Bank of Travancore, Federal Bank, Dhanalakshmi Bank, South Malabar Gramin Bank, North Malabar Gramin Bank, Indian Overseas Bank and Central Bank of India.

Also the 5 percent state subsidy will bring down the interest rate to 4% and the special deduction for agricultural loans will further bring down to 2%. And the remaining interest rate will be waived by way of Kudumbashree’s mission subsidies and bank deductions.

Under this scheme there is a loan limit of Rs 1 lakh and in the present situation when it is not easy for the collective farming units to get loan from banks, this will prove beneficial for them.

However in the financial year 2008-09, the collective farming units under the NHGs had cultivated 27,270 hectares of land.

In current year’s budget finance Minister T M Thomas Isaac had announced that the State Government will provide 5 percent subsidy on the interest for the Kudumbashree loans taken from commercial and co-operative banks thus the present loan scheme is the outcome of the announcement.

Monday, May 24, 2010

Mobile banking still not accepted flourishingly in India

Although the number of mobile users in India has reached 600 million, the percentage of mobile banking users is very low. Over the past two years, only 5% users have registered for mobile banking and only .05 % of the total, are active users, according to global consultancy Deloitte. Even in the urban cities the customers still prefer to engage in informational and not transactional activities through their mobile.

The reason for low rate of mobile banking is lack of integration between telecom operators and banks, along with an unattractive and in-scalable revenue model for banks. According to Sanjeev Patel, head and executive vice-president, “The transactions in mobile banking are relatively miniscule as compared to other established channels such as internet and ATM. Thus standalone costs for the mobile banking transactions are fairly high.”

Sachin Sondhi, senior director, Deloitte says, “Acquisition of customers remains a major issue for banks so that they can scale up their model and make money out of mobile banking.”

It is believed, the modified business correspondent model and UID enabled bank accounts will be a game changer for mobile banking. Business correspondents are persons who, besides helping rural people to open bank accounts, would facilitate in banking transactions. Their main role is to accept deposits and remit money. The outsourcing guidelines are formed by the regulator which ensures that there is no conflict of interest when certain banking activities are outsourced.

Sondhi from Deloitte explained that banks are providing mobile banking services for free and have restricted to no frill services and accounts. “Its time they provided attractive loan services at some cost, at least in the tier I cities and get more customers into mobile banking. Only when customers engage in transfer funds and loan payments through mobiles, banks would be in a position to scale up their services and profit from mobile banking”. Therefore a different model is needed for tier I cities and rural cities.

Besides reducing high transaction cost, India also need to resolve another issue in mobile banking. The system requires collaboration from different constituencies - banking institutions, mobile operators and regulators. Patel from HDFC says that the permission given by the central bank to the banks and operators to leverage the available infrastructure is going to help in long run and it will ensure success of using mobile banking services for inclusive growth of financial services.

Regarding the bank-telco integration, Rajesh Dongre, COO, mobile commerce, Vodafone Essar says that telecom service points are quite large in number and are easily accessible when compared to bank branches. He added, “In mobile banking, partners should be allowed to play to their strengths. That is, the bank performs the banking activities and the telco takes on the other related activities. The best way to popularize mobile banking is for the banks and regulators to bank on the mobile operator.”

Although the business correspondent model is in a growing stage in India and still most of the banks are waiting for guidance from the regulator. But the question arises whether banks and operators can come together? And if this does not, happen then most of the banks will depend wholly on the business correspondent model, said Sondhi from Delloite.

Friday, May 21, 2010

Banks in final process of switching to base rate system

The banks are in the final process of switching to the base rate system. The banking industry average for the base rate is between 8-9%. Major banks like State Bank of India, HDFC Bank and Kotak Mahindra Bank are working out to offer more aggressive rate of below 8%.

From July banks will replacing the benchmark prime lending rate system with base rate system under which the banks will be calculating their actual lending rate with reference to this base rate.

However most of the banks are working out an average base rate between 8-9%, it is believed that SBI, HDFC Bank and Kotak Mahindra Bank are planning to work out more aggressive competitive pricing.

According to sources SBI is expected to keep its average base rate in a range between 7-8.5%. HDFC Bank is planning at about 6.5% and Kotak Mahindra Bank is looking in the region of 6.5-7%. This is the range these banks are planning and focusing on at present.

On the other hand if we compare these rates to their peers, it is much higher. Axis Bank is planning to price its base rate between 8-9% whereas Punjab National Bank is looking at base rate above 8%. Dena Bank and Bank of India are looking at pricing range above 8%.

But everyone is looking at SBI as how the PSU major will price its base rate as rest of the banks will set their respective base rates accordingly.

Thursday, May 20, 2010

Bank recovery agents informing HR dept about their defaulting employees

After restriction from RBI and the court on banks regarding recovery of loan and appointment of recovery agents, recovery agents of banks and financial institutions have adopted a new method of arm-twisting credit card holders and loan defaulters into paying up their dues. They are calling up the human resources department of their companies to complain about the defaulting employees.

While giving confirmation about this measure, recovery agents said, in many cases they have found that visiting to homes and offices of the employees is not creating much pressure on people to pay up. Abdul Wahab, a recovery agent attached to a nationalized bank told, "It has worked in many cases as the employees feels the HR department will take stern action against them."

CV Gidappa, general secretary of the Credit Card Holders' Association of India, also said the banks are now approaching the HR departments to create fear among defaulters.

Gidappa said, "It is a matter of dispute between the borrower and the lender and one can't understand why banks are approaching the employer. It creates bad blood." He informed as a result in many cases the employers had promptly sacked the defaulting staff as they feared the company's image was at stake.

"We know that banks are doing this on a large scale because I have received many complaints from professionals who have been sacked in this manner of late," he said.

Gidappa told in one of the case one woman was called by her manager in the mid of the project and was asked to resin as she had defaulted on installments on a personal loan she had taken from a bank. On the other hand when employee was contacted she said, "I was not allowed to give my version. It was not a secured loan and the company had no stake in it. But since it was I who handed the resignation letter, I am not in a position to take them on legally."

Giddappa said there is increase in instances where companies have sacked employees for defaulting. One IT company had sacked eight employees in this regard.

Total income of banks rose to Rs 11,457 crore as compared to Rs 9,927 crore in 2008-09 while its operating profit increased to Rs 2,421.5 crore, up 43.71 per cent.

Tuesday, May 18, 2010

How to check difference between fake and genuine note

Over the past few years the crime branch of India has seized fake notes of crores of rupees from various parts of the country including Calcutta and its suburbs. In this connection several people have also been arrested. The increase in the number of arrests and seized of fake notes show that large international gangs have network through which they are circulating fake notes in the city.

According to police records there are more than Rs 100 crores fake notes in circulation in and around the city and recently, fake notes of Rs 1.8 crore have been seized, which the police feel is the tip of the iceberg.

Over the past two years police has arrested around 44 people in this connection with the fake currency racket.

Fake notes of Rs 1 lakh are sold for Rs 60,000 in genuine notes. The terror operatives keep a part of the income while the rest swells the ISI coffers.

If someone accepts a fake note or gets one in circulation, he suffers a financial loss and also he has to give explanation to the police from where he got them.

If anyone gets fake notes he should deposit fake notes at a bank or a police station. If one gets a fake note from an ATM, then one should take it to the nearest branch of the bank and provide officials the time of the transaction, amount involved and the denominations of the notes handed out. Also one should keep the withdrawal receipt of the ATM as proof.

Let us see how to check features on the note like watermark

Find the empty portion on the left side of the note. Hold the note against light. One should be able to see a portrait of Mahatma Gandhi in this space, along with multi-directional lines and an electrolyte mark showing the denominational numeral (i.e. 100, 500...).

Visually disabled people can identify the denomination because of the watermark

What is micro-lettering?

Hold the note at eye level. Look at the gap between the vertical band on the right and the portrait of Mahatma Gandhi. In case of genuine notes, you should be able to see the word RBI and the denominational numeral in this space. Hold the note horizontally, with the right vertical band facing you. One should be able to see a latent image of the denomination.

If you hold the note against light, to the left of the portrait and half down the vertical band on the side, one should see a floral design, which appears hollow on the front side and filled up on the opposite side. The complete denominational numeral can be seen in this floral design, though half of the numeral is printed on one side and the other half on the opposite side.

Other identification marks

Below the floral design, one can see a dark patch in intaglio print (raised print). The shape of the intaglio print varies according to the denomination of the note. There are different shapes for different denominations (Rs 20 - vertical rectangle, Rs 50 - square, Rs 100 - triangle, Rs 500 - circle and Rs 1,000 - diamond).

On genuine notes you see security thread

It is 1.4mm wide. It is a broken band on the front of the note. However, from the back, it looks like a complete band. The words RBI and Bharat (in the Devanagari script) are inscribed on it. The security thread appears yellow in ultra-violet (UV) light. This thread will not glow if the note is fake.

What does UV light show?

Optical fibers on real notes make themselves visible when held under UV light. In case of a fake note, optical fibers are fewer in number. The year of printing of the original note should also be visible in the middle and the reverse side, near the bottom.

A genuine note is made of a fiber, which has a “unique feel” and makes “a crackling sound”. These features are common in notes that were released after 2005.

Also check color changes. Move Rs 500 or Rs 1,000 note. The color of the numeral will change from green (when you hold the note flat) to blue (when it is held at an angle).

Monday, May 17, 2010

BoM Pimpri branch suffered loss of Rs 31,600 due to fake notes

The Pimpri branch of Bank of Maharasthtra (BoM) has received fake currency notes of Rs 1,000, Rs 500 and Rs 50 denominations in the last ten months due to which it has suffered a loss of Rs 31,600. The senior manager of the bank, Bhalchandra Bhivaji Avhad has lodged a case under Section 489B of Indian Penal Code with the Pimpri police station. The police has started investigation.

Senior manager-in-charge of the bank, Avhad while describing the whole incidence said, “We have been given special powers by the Reserve Bank of India, Belapur branch in Mumbai, to accept remittance from all branches of the Bank of Maharshtra in Pimpri-Chinchwad and other rural areas. A total of 45 branches fall under our jurisdiction.

We counted all the cash that was deposited from December 16, 2009 till May 5. During this process, we also segregate the soiled, torn notes and also check for the counterfeits.

It was during this counting that we noticed the fake notes. We have found 12 notes of Rs 1000, 39 notes of Rs 500 and two notes of Rs 50, the total amounts to Rs 31,600.

All the notes had come from different branches and so it was difficult to point out from where the notes came. So we approached the police and lodged the complaint. We have also provided the police with the fake notes.”

Police sub inspector K D Kate of Pimpri police station said, “The complaint has been lodged on Tuesday. We have confiscated the notes which will be now sent for analysis.

We are also using our informer’s network to get some clue. We are probing the possibility of the involvement of gangs which had been arrested in similar cases earlier. The investigation is on.”

IPC Section 489B deals with “using as genuine, forged or counterfeit currency-notes or bank-notes.” It states that “whoever sells to, or buys or receives from, any other person, or otherwise traffics in or uses as genuine, any forged or counterfeit currency-note or bank-note, knowing or having reason to believe the same to be forged or counterfeit, shall be punished with [imprisonment for life, or with imprisonment of either description for a term which may extend to ten years, and shall also be liable to fine.”

Friday, May 14, 2010

No transaction done for one year bank classifies such accounts ‘inactive’

If you have a bank account whether for share dividends or investment purpose, it is necessary to carry out transaction once a in a while on such unused bank accounts. If you don’t then you have to get it reactivated and might have to pay charges (if any). You should withdraw cash at a branch or an ATM, make a cheque payment, and transfer funds through either of the banking channels at least once a year. However most of the big banks like SBI, HDFC Bank or ICICI Bank does not charge any penalty, but Barclays Bank charges a penalty of Rs 250, excluding service tax. If the bank account is inactive/dormant account then you can’t use the account or any banking service linked to it.

If for more than a year you don’t carry out any transaction or with draw money from your account through ATM, branch or internet then bank terms such account as inactive. If the account is kept unused for almost two years, such bank accounts are termed as ‘dormant’. Once the account is classified as ‘inactive’ you cannot operate it through the ATM/phone or internet banking as bank systems do not identify inactive accounts. To get the account reactivate these accounts the customer has to go the bank branch for this.

However there is no standard norms among the banks regarding the time period after which bank classify the account dormant or inactive. HDFC Bank classifies an account as inactive if it’s not operated for a year. On the other hand ICICI Bank has set 15 months whereas foreign banks like Citibank, HSBC and Standard Chartered Bank classifies an account inoperative if no transaction is done for a period of two years. System-generated debits (default charges or debit interest) as withdrawal don’t qualify as a transaction.

As per the IBA model policy on bank deposits, banks have the right to transfer such unused accounts to a separate dormant/inoperative account status. But before freezing the accounts bank has to inform the customer and also bank have to inform about all the relevant charges applicable on such dormant/inoperative accounts. Also, the Banking Codes has clarified that bank has to give the relevant information at the time of opening the account. The bank also has to inform the customer three months in advance before it freezes the account.

The account can be reactivated by going to the branch for a withdrawal transaction using cheque book. Account can also be reactivated through internet banking you can instruct the bank to pass Re 1 debit and credit entries into your account. If your account have been ‘inactive’ for more than a year, you have to give an application for activation of the account signed by each of the account holders. The other documents required are photo identity like passport or driving license for each account holder. All account holders (including joint account holders) have to go to branch and take along the documents and the cheque book with them to get the account activated.

Thursday, May 13, 2010

YES Bank to foray in retail banking, focus on professionals

YES Bank, a new generation bank is planning to foray into home, personal and education loan and credit card businesses soon, which will increase competition in retail banking.

The bank has worked out five-year growth plan in which it plans of doing business of Rs 1,50,000 crore by 2015, of which 20-25 per cent it plans to achieve from retail banking, said Somak Ghosh, group president for corporate finance and development banking, Yes Bank while speaking on the sidelines of a seminar.

By the end of financial year as on March 31, 2010, bank’s advances amounted at Rs 12,193 crore and deposits at Rs 26,979 crore.

He added, “We are aiming at a compounded annual growth rate of about 35 per cent and we are hopeful of achieving the target in the next five years.”

Ghosh said, currently is getting 90 per cent of the business from wholesale banking. The bank is planning to focus on professionals, like doctors, lawyers and accountants, among others, to bring out customized home loan products, especially for loans above Rs 25 lakh, he said.

“In the next five years, we will focus on retail loans like personal & home loans and credit cards in a big way. We will look at professionals like doctors, lawyers, accountants and travel agents for home loans. For loans to individuals, we will stick to those having corporate accounts with our bank,” he added.

Over the next five years bank will be opening 750 branches and 3,000 off-site ATMs to increase its retail business. Ghosh said, over the next five years, bank plans to achieve about 22 per cent of the total business from SME loans.

Tuesday, May 11, 2010

Banks across Karnataka to extend insurance and open “no-frills” accounts

Commercial banks across Karnataka are planning to extend insurance and other banking services to all villages with a population of over 2,000 under financial inclusion plan (FIPs). Under this the targeted beneficiaries to all villages will be provided banking facilities by way of a regular brick and mortar branch or using information and communication technology through banking correspondent (BC) model.

“These services will be provided using appropriate technology back up. In this regard, all banks have submitted their board approved FIPs as directed by Reserve Bank of India (RBI). The banks will meet the target of March 2012 set by the government of India for providing banking facilities to all villages with 2,000 and above population,” Basant Seth, chairman and managing director, Syndicate Bank and convener, State Level Bankers’ Committee, said.

He said, in Karnataka there are about 4,858 villages with a population of over 2,000 and of this, there are no banking facilities in 3,367 villages.

On May 14, 2009 a meeting was held between the Governor of RBI and the senior officials of the state government and banks in which it was decided that all house holds across all villages in Karnataka, which have been issued photo identity cards by the state government, will be covered under the financial inclusion program by opening “no frills” accounts.

Bank branches have been supplied the data obtained from department of food and civil supplies was mapped village wise as per service area of branches and printed templates along with control sheets through lead district managers for verification of the existing accounts. Seth informed, by May 31, 2010, the process of opening of “no frills” accounts under renewed drive will be completed.

Regarding the credit flow to Micro and Small Enterprises sector, Seth said that banks have been instructed not to ask for collateral security for loans up to Rs 10 lakh, earlier the limit was up to Rs 5 lakh. He further added, RBI has advised the commercial banks to achieve a 20 per cent year-on-year growth, in credit to micro and small enterprise in order to increase the credit flow.

The website of SLBC was also inaugurated on this occasion by the state chief secretary S V Ranganath.

Banks across Karnataka to extend insurance and open “no-frills” accounts

Commercial banks across Karnataka are planning to extend insurance and other banking services to all villages with a population of over 2,000 under financial inclusion plan (FIPs). Under this the targeted beneficiaries to all villages will be provided banking facilities by way of a regular brick and mortar branch or using information and communication technology through banking correspondent (BC) model.

“These services will be provided using appropriate technology back up. In this regard, all banks have submitted their board approved FIPs as directed by Reserve Bank of India (RBI). The banks will meet the target of March 2012 set by the government of India for providing banking facilities to all villages with 2,000 and above population,” Basant Seth, chairman and managing director, Syndicate Bank and convener, State Level Bankers’ Committee, said.

He said, in Karnataka there are about 4,858 villages with a population of over 2,000 and of this, there are no banking facilities in 3,367 villages.

On May 14, 2009 a meeting was held between the Governor of RBI and the senior officials of the state government and banks in which it was decided that all house holds across all villages in Karnataka, which have been issued photo identity cards by the state government, will be covered under the financial inclusion program by opening “no frills” accounts.

Bank branches have been supplied the data obtained from department of food and civil supplies was mapped village wise as per service area of branches and printed templates along with control sheets through lead district managers for verification of the existing accounts. Seth informed, by May 31, 2010, the process of opening of “no frills” accounts under renewed drive will be completed.

Regarding the credit flow to Micro and Small Enterprises sector, Seth said that banks have been instructed not to ask for collateral security for loans up to Rs 10 lakh, earlier the limit was up to Rs 5 lakh. He further added, RBI has advised the commercial banks to achieve a 20 per cent year-on-year growth, in credit to micro and small enterprise in order to increase the credit flow.

The website of SLBC was also inaugurated on this occasion by the state chief secretary S V Ranganath.

Monday, May 10, 2010

Consumer should first approach bank for redressal of complaint before Ombudsman

How many of us are aware about the process for filing complaint with the Ombudsman? It seems the percentage will be around 2-3 % only. Earlier people did not know about the Banking Ombudsman and as they know about it many of them don’t know about the conditions for governing the filing of complaint before the Ombudsman due to which large number of complaints get rejected at this stage simply.

Reason being every complaint that goes before the Banking Ombudsman has to go through the following checks to determine whether case can be taken up or not.

First it is checked whether the complaint comes under the jurisdiction of the Ombudsman.

Second is whether it is a ‘first resort complaint’ – means did the consumer first tried to approach the bank for redress of his complaint.

Third whether the complaint has been filed within the prescribed time limit- that is within one year from the receipt of a reply from the bank.

Then the other issues are (a) whether the complaint has been handled by the Ombudsman before, (b) whether it is pending before any other tribunal or forum or law court and (c) whether there has been any decision on the dispute by any other court or tribunal or forum.

The most basic thing is that the consumer should try the in-house complaint redressal forum provided by the bank. When he or she does not get any satisfactory response they should redress mechanism provided by the Ombudsman.

As consumer are not aware about this as a result many consumers complaint gets rejected from the Ombudsman.

Although they can re-send the complaint after completing the formalities and in some cases, the Ombudsmen say when it rejects the complaint, it also send a copy of the complaint as well as the rejection letter to the bank concerned and some banks do respond at this stage and sort out the problem.

However there is no statistical data available that how many such cases are resolved in this manner.

As per records in 2007-2008, as many as 7,950 complaints were sent back because they were ‘first resort complaints. The number constitutes 40 per cent of the total number of 19,735 complaints rejected.

In the next year the number was more than double- 18,187 complaints were ‘first resort ‘complaints. The total number of rejected complaints increased which shows that there is lack of consumer awareness about the scheme.

In 2008-2009 the total number of such rejected complaints stood at 43,115.

So the first step is to approach bank for redressal of complaint. When you send your complaint, give your complete address and contact details. Consumers also need to remember that they cannot file the complaint before the consumer forum as well as the Ombudsman. If you don’t find the decision given by Ombudsman satisfactory then you can file a case before the consumer court but you cannot file the complaint simultaneously before both the forums.

In one of instance the customer said that he filed his complaint related to home loan issue with Ombudsman but it was rejected by it as he had not approached the bank first. After that he has sent several e-mails to the bank, but the bank was not responding. Even his e-mails were bounced back.

In such case he should send a hard copy of the complaint to the bank’s Nodal officer.

The RBI has made it mandatory that every bank must nominate a nodal officer for redress of consumer complaints.

You can get the contact details of the Nodal officer from the bank. Send your complaint by registered post, acknowledgement due.

In case bank does not reply within a month, re-send your complaint to the Ombudsman, but while doing so, make sure that give proof of having complained to the bank first. And always remember to give your complete address and contact details, also of the bank.

Wednesday, May 5, 2010

Urban co-operative banks with strong corporate governance get approval to open ATMs

The urban co-operative banks with strong corporate
governance can now set up offsite ATMs as the Reserve Bank
of India (RBI) has relaxed rules for this. Before, UCB had
to take approval from RBI to set up an off-site ATM.

After relaxation in rules the banks having lower bad loans,
three consecutive years of profit and professionals on
their board can set up off-site ATM with out the prior
approval from RBI.

RBI said along with profit requirement, banks will have to
hold their net non-performing assets below 5% and must have
at least two professionals on their board to be eligible to
set up ATMs without approval.

In case a bank has ever defaulted on meeting its cash
reserve ratio or statutory liquidity ratio requirement, or
bank’s capital adequacy ratio fell below 10% in the
preceding year then also bank cannot set up off-set ATM.

According to RBI’s older guidelines, to be eligible to set
up an ATM bank must have operating profit for three
proceeding years, the net NPA should be less than 10% and
they have to maintain the minimum prescribed capital
adequacy ratio- which is 9%.

Also, earlier it was not necessary for banks to have
professional members on the board and nothing was mentioned
about defaults on maintaining CRR and SLR.

While in its new guidelines, regarding the approval RBI has
also stated that regulatory will have full say on issues
like track record of compliance with the provisions of
Banking Regulation Act, 1949, RBI Act, 1934, and the
instructions or directions issued by RBI from time to time.

A senior official from a UCB said, “The only liberalization
is that if an UCB is eligible as per new norms, it does not
have to seek prior approval from RBI to set up offsite

Earlier in 2001 after Madhavpura Co-operative Bank had
suffered huge losses on account of securities scam, RBI did

not issue any issuing fresh branch license to urban

co-operative banks.

Also, these banks were not allowed to freely set up offsite
ATMs, instead it was made mandatory that all commercial
banks have to come up with an annual plan on branch and ATM

In its April policy, RBI had stated that well-managed UCBs
will have to submit annual business plans having details
where they plan to open new branches on off-site ATMs.

In the April policy, RBI had said well-managed UCBs are
required to submit annual business plans detailing where
they plan to open new branches on off-site ATMs. The
central bank said in its policy, “In order to further
improve the banking infrastructure, it has been decided to
liberalize the approach to set up offsite ATMs by UCBs.

Accordingly, it is proposed to allow well-managed UCBs to
set up offsite ATMs without seeking approval through the
annual business plans”.

Andhra Bank to open 10 branches in Mumbai, already received license for 5 branches

Andhra Bank is doing good business in Mumbai zone. Looking at the growth bank has decided to open 10 new branches in Mumbai during the current fiscal, a senior bank official told.

"Presently, we have 86 branches in the Mumbai zone. We now plan to open 10 new branches here and we have already received licences for five branches," Andhra Bank's general manager (Mumbai Zone), M Anjaneya Prasad, told PTI here.

The five new branches for which bank has obtained license will be opened in Gandhidham, Bhavnagar, Jamnagar, Jalgaon and Sangli.

During FY 10 the bank had opened 125 branches across the country including 22 in the Mumbai zone.

Prasad said, in the current fiscal (FY 11), Andhra Bank has set a target of achieving an overall business growth of 25% from the Mumbai Zone.

In FY 10 Andhra Bank achieved a growth of 60.15% overall in its net profit at Rs1,046 crore as against to Rs653 crore in FY 09.

In the last fiscal (FY 10), bank business reported a 29.26% at Rs1,34,194 crore growth as compared to Rs1,03,818 crore in FY 09

However in FY 10 bank net NPAs stood at 0.17% while gross NPA was capped at 0.86%.

Pay charges for corrections or alterations in anything on cheque leaving date

Now if you by mistake write wrong spelling such as ‘hundered’ instead of ‘hundred’ on a cheque and just strike off the additional ‘e’ and issue the cheque then you will have to pay return charges that are Rs100-250 for public sector banks and Rs350-550 for private banks. So issue fresh leaf.

Recently the Reserve Bank of India (RBI) has issued a circular to the banks that they should not accept cheques that have corrections or alterations in anything but the date. RBI is taking this measure in order to “help banks identify and control fraudulent alterations”. However banks have started informing customers about the policy change through mails.

S Govindan, general manager (personal banking and operations), Union Bank of India said, “It is consumer protection that the RBI is looking at. Many a times cheques are stolen and encashed by other parties by making corrections.”

He said such measure is important in changing scenario where the cheques are being dealt differently. “Earlier, banks used to tell people not to issue a bearer cheque and about some basic precautions. But now cheques get couriered. Also, they are deposited in drop boxes. So the possibility of them falling into the wrong hands is high.”

The RBI is trying to reduce and, if possible, eliminate transactions through cheques. A banker pointed out, “Now that daily interest rate calculation has come in, it works in your favour to keep money in your account for as long as possible. At least three days are wasted in the issuance of a cheque. Whereas net banking is instant”.

YES Bank got green signal from RBI to offer mobile money service in India

In India soon you will be able to pay for your purchases using your mobile phone. This facility is available in western countries. In Pune the project was launched on a trial basis and is doing “extremely well”, thus Nokia is expecting money transfer using mobile phone is going to grow gradually. During the ‘strategy sharing session' Nokia described its vision for mobile money services launched in India, as a business with enormous revenue potential.

Yes Bank has got green signal from the Reserve Bank of India to offer mobile money services in association with Nokia. (Obopay, a California-based company, in which Nokia has a stake, offers the technology back-up for YES Bank.) The trial project in Pune will be ending in couple of months and its result will most probably provide inputs for RBI which will help it in regulating the launch of the services in India.

However Nokia is ready for roll out of services. The process would be, you go to any of the two lakh Nokia's retail outlets across the country and fill a form which acknowledges that you are an account holder with YES Bank. Nokia promises that the process will not take more than 15 minutes.

Then you can deposit the amount at the Nokia outlet and within minutes the ‘credit' will appear on your mobile phone. You are ready to make payments at shops, pay electricity and water bills and even transfer funds to another person.

At present only YES Bank has got the approval later on other banks can follow the suit. Nokia is having talks with few other banks, but it will depend on the banks that they apply for approval with the RBI, Nokia refused to disclose the names of the banks or give a timeline for the launch of the service. Obopay charges two per cent of the value of payments as commission, except for utility bills, where the payment would be between Rs 5 and Rs 10 a transaction.

You can lose money in phishing without any mistake on your part

Usually you lose money due to carelessness while doing transactions at ATM or online. But there is a case where an elderly gentleman found his money disappearing from his account without making any mistake or carelessness.

Dwarak Ethiraj is staying in Chennai and has an ICICI Bank account in Pune. Late February, this year he got a rude shock when he received an SMS from his mobile service operator, Reliance India Mobile stating that his “handset change request has been processed”. (Such request is placed with the service provider when a telecom customer loses his handset. In this the number remains the same and calls will be directed to the SIM on the new phone).

After this message, the SIM in Ethiraj's phone became invalid and he could make no more calls, except to the telecom company's customer care number. However his number remained valid but it was being used by whoever had committed this fraudulent change.

Then, on the next day he received a call from ICICI Bank on his landline number informing him that Rs 1.55 lakh had been taken out from his account and paid to four new beneficiaries across 10 transactions. The transactions were done around 11 p.m. the very day his mobile number was hijacked.

Ethiraj is confused. He says, “One, I don't know how a telecom service provider can authorise a handset change when the number is in my name, and I have not made such a request. Two, how did the perpetrator of the fraud get access to details on my ATM/Debit card and make those amount transfers?”

The victim’s puzzlement stems from this: in case you want to transfer amount from your ICICI account, you have to punch in a login and password before you access your account, also you are asked to input numbers that you find at the back of your card. This is done at random and hence it is difficult to predict what exactly the security system would ask you. For instance, it will ask you to enter the numbers placed under box A, I and N at the back of your ATM Card. In the next transaction, it might ask you for numbers in boxes C, F and G.

Then, there is another layer of security having confidential code which is sent to the mobile number registered with the bank, when you wish to add a beneficiary to whom payments could be made. In this case also, codes generated by the system at the bank will have reached the mobile number, but clearly, in the hands of the perpetrator of the fraud.

Ethiraj says he took up this matter with the Reliance Communication's call centre and then he visited the local outlet as well as to the nodal office of the telecom service provider. But nothing has been done. He is yet to hear from them. Ethiraj says that ICICI Bank is also yet to clarify as to how such confidential information, specific to his ATM card, had been compromised.

He told that in the Internet banking profile at the bank's Web site, his current e-mail ID has been replaced with a defunct ID used previously.

The victim's other question to the bank is this, “All the four beneficiaries are customers of ICICI Bank. It would be easy to locate those four with the help of Know Your Customer documentation that the bank would have.” He informed that till now bank has not shared such information with him.

On the other hand service provider’s say

Reliance Communications has not given any response to eWorld's e-mail queries. Ethiraj says, “When I make a handset change (or SIM change) request, I have to support it with documentation with regard to identity proof, address proof and the like. When I, myself, have not made such a request, how could someone else walk away with my number on another phone?”

A spokesperson for ICICI Bank replied to eWorld's e-mail saying, “... It is practically not possible to fraudulently withdraw money from (an) online account unless the personal details are compromised by customers inadvertently or otherwise. ICICI Bank sends a code (URN) by SMS on the customer's mobile phone every time a new payee has to be added. The customer needs to confirm the payee by entering this URN. In this case ICICI Bank sent the URN to the registered number of the customer as per the standard process.”

According to bank, “the mobile operator allegedly issued SIM to an imposter without duly verifying know-your-customer (KYC) documents. It is impossible for a bank to know that such a duplicate SIM has been issued by an operator because the registered mobile number in our record has not changed". Most of the banks claim that their employees can also not access the numbers given at the back of the ATM. When asked, ICICI bank repeated what it said above.

Then what has exactly happened with Ethiraj? Was Ethiraj a victim of a ‘phishing' attack? Ethiraj says he did get an e-mail, prior to his loss, which was obviously trying to ‘phish' for information. He said, “I certainly did not give out any confidential information.” He says, he had forwarded that message to ICICI Bank.

(Wikipedia describes ‘phishing' as a criminally fraudulent process of attempting to acquire sensitive information such as user names, passwords and credit card details by masquerading as a trustworthy entity in an electronic communication.)

However, in a case of cyber crime through phishing, the Adjudicating Officer in Tamil Nadu, the state's IT Secretary, PWC Davidar, last fortnight passed an order against the bank. In the case the defendant was ICICI Bank which has been ordered to pay nearly Rs 13 lakh against the original loss of Rs 6.5 lakh to a customer, including interest costs and other expenses.

Although, in that case, the customer had accidentally, given out his details during a ‘phishing' attack. The officer told that the list of instructions on phishing put by the banks on their website and sent to the customers, were of a “routine nature” and did not help a customer distinguish between an e-mail from the bank and an e-mail sent by somebody suspect.

He also said that the banks are taking shelter behind routine instructions on phishing and had avoided taking steps that would benefit the customer. Davidar, in his verdict, said that the bank's actions indicated it had “washed its hands off the customer,”

Ethiraj says that though bank is investigating to find out what had happened, “The bank should pay me back the money I have lost.” The present status of Ethiraj's case is that his complaint against the telecom and banking institutions is with the Cyber Crime Branch of the TN police in Chennai. The Branch has asked the two companies to provide the details.