Cash Reserve Ratio (CRR)

All Scheduled Commercial Banks are required to keep a portion of money received from its customer with RBI this is called Cash Reserve Ratio. But Why ?  the answer can be known by reading below article on CRR,

All of we know RBI is the controller of Banks and the monetory / credit system of our country. The RBI act gives it wide powers to do so. Cash Reserve Ratio is one such power of RBI.

As per Section 42(1) of RBI act of 1934 RBI having regard to securing monetary stability of the country prescribes CRR without any floor or ceiling rate.

Virus - Beware

cyber security sleuths have detected a 'black' private information stealing virus in the Indian online banking transactions space and have alerted consumers who swipe debit or credit cards at shopping counters to make payments.

The 'severely' spreading virus of the Trojan family has been detected conducting its clandestine operations at the point of sale counters placed at retail terminals after the RBI made it mandatory in December last year for debit cards holders to punch in their PIN every time they make a purchase.

Rajiv Gandhi Equity Savings Scheme

Our honourable prime minister Mr. Manmohan Singh has put red carpet for attracting new investors to financial markets. The scheme is Rajiv Gandhi Equity Savings Scheme. For investment up to maximum of Rs.50000/- , the investors can get 50% tax rebate. This is one time sop for first time investor only. It is available to those with taxable income of upto Rs.10 lakh. But some riders are attached to it.

1. The investment must be in Top 100 shares of BSE or NSE.

2. The investment made in PSU companies can also get tax brake.

3. If the investment is made in Mutual Funds and ETFs then the scheme in which funds are invested must comply with above conditions.

4. The investments have lock-in period of 3 years.

5. But the investors can trade after one year but must maintain the level of investment and also keep points 1 to 3 in mind while reinvesting.

CSIS

CSIS Central Scheme of Interest Subsidy for Education Loans It is well known fact that education is one of the major concerns of the government and nobody should be denied of education only because he is poor. To help the economically weaker section students the central government has introduced an interest subsidy scheme. The Central Government has introduced a scheme to provide Interest Subsidy upto moratorium period of educational loans availed by economically weaker section of students for their technical/professional studies in India conducted by recognized institutions from scheduled banks. The period of moratorium means Course period plus one year OR six months after getting the job which ever is earlier. Economically Weaker Section students means students whose family/parental income from all sources is less than Rs.4.5 lakhs per anum. The income assessing authority will have to be notified by each state as per directives of Ministry of HRD, Government of India. Majority of states have declared Income certificate issued by Tahsildar is valid income proof. The student will get full interest subsidy on his loan amount till course period plus one year or six months of getting job whichever is earlier. The student will also be eligible for getting 1% interest subsidy that he is getting for prompt repayment of interest debited during the month on his education loan account within 30 days of debit. Applicability of student: 1. Economically weaker section students 2. Studies in India 3. Professional and Technical studies 4. From recognized institutions 5. Loans taken from Scheduled Banks 6. Only for students who have taken professional/technical courses after 10 + 2 Interest subsidy if available only once for a student either for graduation or postgraduation. But when the student undertakes integrated course then CSIS is applicable in that case. The subidy will not be available once the student discontinues the course OR expelled from the college or disciplinary grounds. But where the student discontinues the course due to medical reason and if he provides sufficient proof for the same the CSIS can be given. The marks card of the student who had availed CSIS scheme bears a Tag to the effect that the student is covered under CSIS scheme to check for the regular repayment and the employers can identify the loanee. Canara Bank will be the Nodal Bank for the scheme. The Government will request for claim in specified formats. All banks will forward their claims to Canara Bank in those formats which in turn will be claiming it from the Government and the received subsidy will be distributed to member banks as per their claims. Applicability of the Scheme: The scheme is implemented from 2009-10 i.e., from 1st April 2009. All loans taken wef 1st April 2009 which fulfills the conditions set out under the scheme will be covered under CSIS and also the loans sanctioned before 1st April 2009 where part disbursement is made on or after 1st April 2009 which fulfills the scheme guidelines will be covered under the scheme to the extent released after 1st April 2009. The role of Student: 1. If you have taken loan from any scheduled bank and you fulfill the conditions set out to get subsidy kindly visit the bank branch where you have taken education loan to get full scheme guidelines. 2. Provide income certificate to bank authorities as per the formats provided by bank and as per the income assessing authority for your state (mostly Tahsildar). 3. Sign agreement along with your parent and bank to get yourself covered under the scheme. 4. Now you are covered under the scheme. The role of Bank: 1. If any student approaches you kindly verify if he can be covered under the scheme by going through guidelines. 2. If he can be covered then get Income certificate from the student (income of parent/family) 3. Get the agreement as set out by Ministry of HRD, Government of India duly signed by student and his parent. 4. Send the claim (half yearly/ yearly) as called by Nodal Bank (Canara Bank) or your Controlling Office. 5. On receipt of the claim kindly credit to loan account of student.

If you use CyberCafe to do Banking Transaction, Then you must read this

Every time you make an online bank transaction at a cyber cafe, you run the risk of losing all the money in your account, since you could leave traces of your password on the computer. A 27-year-old hacker, who used special software to get nearly 100 bank account passwords from cybercafes, was arrested in Bangalore. "It's a major crime," said SP (Cyber Crime-CoD) B A Mahesh. The hacker is Joseph, a diploma holder in computer science from Virudhunagar district, Tamil Nadu. A Bangalorean since 1999, he worked as a data entry operator before losing his job two years ago. Joseph came under the scanner of sleuths investigating a complaint lodge recently by Carl Braganza, HR manager at a software company. Braganza claimed that someone had hacked into his Citibank account on Oct 10 and defrauded him of Rs.1.27 lakh: Rs.87,200 was used to recharge cellphones and Rs.40,000 transferred to another bank account in Mumbai. The sleuths traced the hacker's IP address to Anu Cyber Cafe in Mahadevapura. They zeroed in on Joseph on November 29. When interrogated, Joseph confessed. Mahesh said Joseph visited cybercafes and installed a free software called 'Key Logger' on computers. "The software captures every stroke on the keyboard. If a person is checking his bank account on the net, all the details are recorded," he said. The number of visitors to cybercafes is high during the first week of the month, when people come to check their salaries. Joseph then went to the computer where he had installed the software and retrieved the data. Once he had the account details, he transferred money to his associates, who charged him a commission. The group recharged others' cellphones at discounted prices from the hacked accounts. " It is similar to a cellphone thief selling a stolen handset for half its original price," sleuths said. Some DOs and DON'Ts for those assessing sites at cyber cafe. DON’Ts Don’t leave personal documents at places where it can be picked up or viewed by others. Don’t log into online account from an insecure network. Don’t enter your log-in details on a website unless you are sure it is secure. A lock at the bottom or ‘https’ in the address field are signs of a secure website. Don’t follow links to banking sites. Don’t respond to e-mails that ask you to enter your bank details. Dos Type the bank’s URL yourself. Use other methods to enter details. Some banks have on-screen keyboards to avoid key presses. Scan your computer and update anti-virus software regularly. Times of India dated 15.12.2007

Class Room

ATM frauds/crimes This article aims at alerting those who use their ATM/Debit cards. In this world fraud can take place in any form. We should be ever vigilant to protect ourselves from that frauds. The technology has paved the way to many frauds. Today’s fraudsters are white collard people sitting somewhere and steeling from your pocket your hard earned money. E-mail and Internet related fraud schemes are being perpetrated with increasing frequency, creativity and intensity. A few methods adopted by fraudsters are; Skimming: Here the fraudsters make counterfeit ATM cards by using a skimmer, which is s card swipe device that reads the information on a consumer’s ATM card. Scammers insert onto an ATM, ready to swipe information from unsuspecting customers. They take a blank card and encode all the information from an ATM card when they swipe The skimmer catches the PIN through a small camera mounted on the ATM. Lebanese Loop: Here fraudsters insert a portable steel loop into an ATM card slot. The fraudster usually approaches the victim while at the machine, and poses as the person next in the line. Victims are advised to enter their PIN three times and then hit cancel to get the machine to accept the cards. The fraudster is able to memorize the PIN for future use and the machine keeps the card because of the excessive number of attempts to enter the correct PIN. The victim cannot get back the card as it is held in the loop. When the victim leaves the fraudster removes the loop and he has both card and pin. Spoofing: Here the attacker creates a misleading context to trick victim into making an inappropriate security relevant decision. For example, fraudster have set up bogus automated teller machines, typically in public areas or shopping malls. The machines would accept ATM cards and ask for PIN codes. Once victim gives the information. Fraudster has enough information to steel the money. Pretexting: Here the fraudster has some information about you and wants to have more information so that he can steel your money. He claims to be from victims bank and makes calls to victim to provide the needed information. Many a times victim provides the needed information and fraudster can make merry on that. Phishing: Here the fraudster sends emails at random, purporting to come from a genuine company operating on the internet and this mail requests the victim to provide his personal information like password etc to update the database. The link provided in the mail takes the victim to look alike website of the bank. When the victim provides the required information, fraudster can steel the money at his will. Protect yourself: While using ATM see that no extra fitting is attached to Machine if any inform the security or the contact number of the bank provided on the ATM. Never take the help of third person to operate your card. Never disclose your PIN to anybody. Never keep your PIN and card at same place. Be cautious when third person comes to help you generously. Never disclose your personal information over phone to bank unless you know Cent percent that this is genuine call. Banks usually never call/mail you to take your personal information, when you receive Such call/mail take his number and confirm/inform the bank.

Tools RBI uses to contain inflation:

Cash Reserve Ratio This is the portion of funds that banks have to retain with the Reserve Bank. When the RBI increase this percentage, the amount actually available with the commercial banks comes down The RBI increases the CRR to draw out exess money from the banking system and thus check increase in prices. Bank Rate This is the rate at which the BRI lends to other banks. If the RBI increase its lending rate, the ripple effect will be felt across all the other banks that will hike lending rates to continue making profits. Repo Rate If banks face any shortfalls of funds they borrow from the RBI. Repo rate is the rate at which banks borrow money from the RBI. If the RBI reduces repo rates, it will be cheaper for the banks to borrow money. On the other hand, if repo rates go up, borrowing becomes expensive. Reverse Repo Rate: The RBI can borrow money from the banks and offer them a lucrative rate of interest. This is called the reverse repo rate and banks will be very glad to have their money with the RBI for a good interest rate as the money is safe here. When the reverse repo rate is increased, banks find it more attractive to park their money with the RBI, and hence money is drawn out of the system.

Opening Savings Bank accounts (SB)

Different banks requirements are different for opening a SB account. But broadly we can state the requirements as below; 1) Duly filled account opening form. 2) Passport size photograph of person opening account. 3) Identity Proof ( Election Card, PAN Card, Passport or any card bearing Photograph of the person) 4) Address Proof ( Election Card, Passport, Electricity Bill, Telephone Bill or any bill containing address of the person) 5) Introduction by an existing account holder. 6) Initial Deposit. • What does account opening form contains ? It usually contains Name of person, Name of father/husband, Address, Date of Birth, PAN number details/F60 details, Education, Profession, Income, Movable and Immovable assets, Family details, Nomination details and many more. • Photo, Identity Proof, Address Proof are required to confirm the identity/ residence of the person. • Proper Introduction is obligation on the part of bank. • Initial deposit varies from bank to bank. Some banks open Zero balance accounts. Public sector banks require less initial deposits compared to their Private sector counterparts. • Many banks offer add on facilities with your SB account like ATM Card, Internet Banking, Tele Banking, Personalised cheque book, Multicity cheque book, Insurance at nominal rates/free insurance etc. Why does Banks are keen to garner more Savings Bank accounts? The banks are keen to have more and more SB accounts because: 1. Their customer base expands, which in turn provides them opportunity to cross sell their products. 2. These are low cost deposits. So the cost of deposits of the bank comes down with aggressive addition of SB accounts. 3. These are stable deposits unlike the bulk deposits where there is always threat that the depositor can close or transfer deposits.

The BOGOF effect

B.Venkatesh (Business Line dated 20.05.2007) Consider this. You walk into a mall and find two stores that sell clothes. You can buy a shirt in the first store at Rs.750 and get one free. The other store sells the same shirt at 50 percent discount to the marked price of Rs.750. Which store would you prefer? If you are a typical consumer, you would prefer to go to the first store, which gives you a free shirt. Why ? The human mind is attracted to anything that is free. “Buy one get one free” (BOGOF) is a marketing strategy to persuade people to buy things. The alternative would be a price a product at 50 percent discount. When a product sells at a discount, it is natural for us to suspect that it is defective. We, therefore, do not prefer to buy such product, unless we want to go bargain hunting. It was this behaviour at work that my friend and I saw at a mall recently, where one store was attracting the crowd because it had adopted the BOGOF strategy. We display similar behaviour in the stock market. A one-for-one bonus share or stock dividend means you get one share free for every share held. There is great demand for stocks of companies that offer bonus shares. Do bonus shares enchance your investment value ? Not quite. The stock price represents the market’s perception of the company’s fundamental value. When the company issues bonus shares, it gives additional ownership from existing value. It is similar to you having two small slices of pizza instead of one large slice of the same pizza. Yet, people like to buy stocks that provide free shares-because of the BOGOF effect.