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 30^th 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.

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".

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.

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.

Shinhan Bank opens third branch in India

South Korean lender Shinhan Bank has opened their third branch in India. The third branch of the bank was inaugurated last week at Walajapet, in Vellore district in Tamil Nadu.

According to an official, the bank will offer a lot of banking products to the customers including term loan, working capital through the corporate branch recently opened.

Shinhan Bank is a flagship company of Shinhan Financial group that belongs to South Korea. The bank was established in 1897 and has more than 18.7 million client base with a total asset base of $ 211.30 billion.

Central Bank to reach every district soon

On the occasion of Centenary celebration of the Central Bank of India , the Chairman and Managing Director of the bank Mr S Sridhar announced the opening of 100 more ATM and adoption of 100 villages across the country.

The bank also announced that they have planned to have a physical presence in every district head quarter by December 2011.

Currently the bank has a physical presence in 496 districts. It has a total of 3,644 branches and 238 other offices and plans to establish presence in 131 more districts by the end of next year.

On the occasion, Mr S. Sridhar said that “We will have a physical presence in every district in the country by the end of our centenary year”.

NRI remittances eased by Dhanlaxmi Bank

In order to offer more facilities to customers, Dhanlaxmi Bank has inked an agreement with Doha Bank. Dhanlaxmi Bank is one the fastest medium size private bank of India. The bank has around 274 branches across India.

This facility will prove very much beneficial for the people in India whose relatives are in Qatar. A person in Qatar can now transfer money directly to any of the branches of Dhanlaxmi Bank in India by any of the branches of Doha Bank in Qatar or by using internet banking service of the bank.

Head branch banking and NRI business, Dhanlaxmi Bank Mr Salil Datar said “This association with Doha Bank is part of our NRI Banking business proposition. The arrangement will enable us to provide our customers convenient and secure services besides expanding our remittance network across GCC countries.”

On the occasion Executive Manager, International banking group, Doha Bank Mr R Ganesan said “The tie-up with Dhanlaxmi Bank provides an opportunity to extend our services to the vast NRI community in the region by meeting all their banking requirements. We are committed to serving the NRIs and provide them a seamless banking experience.”