Friday, January 28, 2011

Banks to set up admin offices in Tier 3- Tier 6 cities

The Reserve Bank of India has decided to grant permission to the domestic scheduled commercial banks to open administrative offices and central processing centers in rural, unban and semi urban areas of the country.

This is a move from the central bank to boost up the Financial Inclusion Plan that is meant to equip all the villages of population more than 2,000 with basic banking facilities before March 2012.

The new guidelines will enable the banks to set up administrative offices in Tier 3 to Tier 6 centers including north eastern states and Sikkim, subjected to report.

RBI has categorized the centers with a population of more than 49,999 as Tier 3 to Tier 6 centers, based on the 2001 census. Such administrative offices will strictly attend back end operations and will not be indulged in any kind of customer dealings.

Wednesday, January 19, 2011

Banks slow in fin.inclusion target in karnataka

The commercial banks in Karnataka have not been able to prove their caliber as they are lagging behind the target set by the Reserve Bank of India for the banks in the state to conclude the Financial Inclusion Plan successfully by March 2012.

Under Financial Inclusion Plan the Central Bank has set the target of providing basic banking facilities to all the villages with population above 2,000 by March 2012.

The banks in Karnataka were allocated a total of 2,253 villages that were to be equipped with basic banking facilities before March 2012 According to a report the banks in Karnataka were able to cover only 1,075 villages under the facility by December last year.

The Chairman of State Level Bankers committee Mr Basant Seth said “Certain discrepancies like duplication or overlapping of villages, inclusion of villages already having branches, and such others were observed and subsequently the target was revised. Thee banks have now been asked to submit the monthly progress made in new formats prescribed by RBI and ministry of finance indicating revised villages,”

As a solution to the problem RBI has suggested the banks in Karnataka to follow one from the two models of one district - many banks or One district — one bank - to achieve the financial inclusion programme.

However here Corporation Bank needs to appreciated as it as already completed the task of extending banking facilities to 124 villages that were allotted to the bank, well ahead of time.

Monday, January 17, 2011

Pay an additional of 2% on every mobile banking transaction

The customers who intends to operate their account through their cell phones will have to pay a commission of 2 percent to their corresponding bank .

According to the inter ministerial report the customers will be able to transfer, withdraw or deposit money through their cell phones or through the micro ATM service provided by the telecom operators. It aims to link the account with UID of an individual but it could be done only after the approval from RBI.

The report says “To promote adoption, government payments under various schemes will be directly credited to these mobile linked no-frills accounts once the citizen registers with the government agency providing such benefits,”

According to the report the banks have to pay 1.4 percent of the commission to the telecom operators that will gradually reduce to 1 percent over a period of next five years.

A few days ago State Bank of India finalized the deal with Bharti Airtel and ICICI bank with Vodafone Essar to provide mobile banking and other financial facilities to the customers of the bank.

Bharti Airtel and Vodafone will act as a business correspondent for the respective banks under the norms laid by RBI on Financial Inclusion Plan and will handle the financial services provided by the bank.

Thursday, January 13, 2011

NABARD to improve condition of Co-op Banks

Due to lack of modern facilities the Co-operative Banks have been left far behind the commercial banks. In order to improve the present condition of the co-operative banks NABARD (National Bank for Agriculture & Rural Development) has planned to bring the co-operative banks under a common Core Banking Infrastructure.

Executive Director of NABARD Mr Prakash Bakshi said “Our effort aims at creating a level-playing field for cooperative banks in terms of modern banking solution. Except for some stray attempts , most of these banks do not have a CBS platform”.

The country has a network of 31 co-operative banks working at the state level and 370 co-operative banks working under them. These banks provides banking facilities primarily to the poorer section of the society. These banks had witnessed a drastic decrease in the number of customers over the years , primarily due to lack of modern facilities.

In order to bring a change to the present condition of these banks NABARD has decided to bring these banks under a common Core Banking Solution . NABARD will also set up a common data center and a disaster recovery system for the banks.

Mr Bakshi said NABARD has written to all its constituents to join hands in this endeavour . “Banks with existing CBS platform can also switch to our platform” . He expects this process to be functional by July this year.

Monday, January 10, 2011

Ready to upgrade your mobile to “mobile wallet”

Mobile banking has gained a lot of popularity in very less time and is poised to gain more popularity in the years to come. People who have been using this service are very excited due to the introduction of such a facility by the banks.

Presently Seven banks—State Bank of India, ICICI Bank ,HDFC Bank , Yes Bank , Axis Bank , Union Bank of India and Bank of India are providing this service to their customers and more banks are expected to follow very soon.

Mobile banking has made the access to the accounts for the customers very easy. They could operate their account from anywhere and at any time. People can check their account details make payments, pay bills, recharge their phone etc and the services provided under mobile banking are likely to expand very soon. In the years to follow people might start using their mobile phones as a smart card for a ride in metro or toll tax on highways would be done through mobiles. There would be no need to carry cash or credit/debit cards.

It is very easy to avail this facility , all that a user requires is just a GPRS enabled phone then the other mandatory thing is that the phone number of the user must be registered with the bank. Then the user have to send a text message given by the bank, then the bank will send a link to the user. The user need to download it, and it is done. Now the mobile is not just an ordinary mobile, now it is “mobile wallet”.

Friday, January 7, 2011

Banks to implement Base Rate method from June

The Reserve Bank of India has extended the deadline for the banks to implement the new method for computing Base Rate. Base rate is the rate below which the banks can not lend money to any one. The new deadline imposed by the RBI is 30th June.

In a notification RBI said “Banks are permitted to change the benchmark and methodology used in the computation of base rate for a further period of six months, i.e. up to June 30, 2011,"

Earlier bank used Benchmark Prime Lending Rate, but there were complaints from the customers that the banks were charging very low interest rates to some of their customers. This is when RBI came up with the proposal Base Rate. The motive behind the introduction o Base Rate by the RBI was to bring transparency in the lending operations of the banks.

Under the new system the customers are charged above the base rate according to their credit profile , it solely depends on the bank that how much extra the bank charges the customer.

Thursday, January 6, 2011

Transactions through ATM to go more secure

RBI is now planning to make the transactions made through the ATM more secure. As the RBI received many complains regarding the misuse of their ATM cards, the bank has planned to bring amendments to the process of ATM transactions.

ATM have gained a lot of popularity and demand in the recent years, because it is very convenient, easy to use and easily available source . As the use of ATM have increased, there has also been a rise in the frauds regarding the ATM transactions.

Earlier a customer could conduct many transactions by punching the PIN only once. There were cases when some people forgot to collect their ATM card during the transaction in the machine itself and some unauthorized person made transaction from the account of the person.

To check such practices RBI has asked the banks to make amendments in the process of the transactions trough the ATM and allow only one transaction for every entry of PIN. Such a practice would definitely bring decline in the ATM transaction frauds.

Earlier RBI instructed the banks to bring the new changes in existence from January 1 , 2011 but some banks were still not prepared and were in the process of upgrading the system so RBI is yet to decide the new deadline. In the meanwhile the banks are making their customers aware about the developments.

In a circular issued by HDFC Bank to the customer, the bank informed : "As per RBI guidelines, you will need to re-enter your ATM PIN for every additional ATM transaction in a single session, with effect from 1st January, 2011".

Tuesday, January 4, 2011

Banks need to tap opportunities in rural area

India is a country with largest banking network in the world. Yet in a population of around 118 crore, we have just 15 crore saving accounts. In the largest banking system the rural area is still deprived of banking facilities.

In recent past rural area was never in the target list of the banks. The banks always assumed rural banking as non- lucrative sector . But the rural areas in India have a lot of potential that can help banks to grow, if the banks are able to tap it in an efficient way.

India has a total banking network of 79,000 branches , out of which only 31,000 are in rural area . In order to meaningfully tap the rural banking opportunity, we need to find solutions to three important challenges namely (1) infrastructure set-up costs, (2) operating costs and (3) risk mitigation strategies. However, the conventional banking approach has so far failed to address these challenges, and therefore, we need to adopt the ‘frugal innovations’ approach to develop a scalable and sustainable business model.

It is a very different management approach that works from the bottom of the pyramid , it vastly differs from the approach that the banks in India uses presently. The business correspondent modal proposed by RBI is also very effective to achieve Financial Inclusion. Through these techniques the banks could cover remote areas very easily.

The easy accessibility of the banks in any form to the rural area would definitely check the exploitation of poor farmers in the villages. Such practices will ultimately help the country to develop from the grass root level as then all the Government schemes would reach the rural population directly and they will be able to make the most of it.

Monday, January 3, 2011

Leading banks raise interest rates

Following the market trend leading banks like State Bank of India , ICICI Bank and HDFC Bank have announced an increase in lending and deposit rates on the new year eve.

SBI announced increase in the base rate by 40 basis points to 8 percent. SBI also raised benchmark prime lending rate by 25 points to 12.75 percent. The new rates would be effective from January 3.

ICICI bank raised the lending rate by 25 basis points to 8.25 percent. The bank also announced an increase in benchmark prime lending rate by 0.25 percent with effect from January 3, 2011.

Besides ICICI, private sector peers like Kotak Mahindra Bank and Dhanlaxmi bank also raised their base rate to upto 75 basis points.