RBI disappoints

6th Bi-monthly monetary policy dtd 3rd February 2015

RBI Governer Mr. Raghuram Rajan disappointed market by not reducing the Bank Rate which was expected at 25 basis points. In the Sixth Bi-monthly monetary policy statement for 2014-15 announced today RBI

• kept the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 7.75 per cent;
• kept the cash reserve ratio (CRR) of scheduled banks unchanged at 4.0 per cent of net demand and time liabilities (NDTL);
• reduced the statutory liquidity ratio (SLR) of scheduled commercial banks by 50 basis points from 22.0 per cent to 21.5 per cent of their NDTL with effect from the fortnight beginning February 7, 2015;
• replaced the export credit refinance (ECR) facility with the provision of system level liquidity with effect from February 7, 2015;
• continued to provide liquidity under overnight repos of 0.25 per cent of bank-wise NDTL at the LAF repo rate and liquidity under 7-day and 14-day term repos of up to 0.75 per cent of NDTL of the banking system through auctions; and
• continue with daily variable rate term repo and reverse repo auctions to smooth liquidity.

Consequently, the reverse repo rate under the LAF will remain unchanged at 6.75 per cent, and the marginal standing facility (MSF) rate and the Bank Rate at 8.75 per cent.

Pre-2005 Currency notes

Now, RBI has informed that Pre-2005 currency notes can be deposited at bank branches till 30th June 2015. Earlier RBI has set 31st December 2014 as the deadline to do so. Now, with extended time you can deposit Pre-2005 with banks at ease and you will get hundred percent value. But don't keep on waiting for RBI to extend the deadline once again. Due it early.

Third Quarter Review of Monetary Policy 2013-14 : Statement by Dr. Raghuram G. Rajan, Governor, Reserve Bank of India

Good morning and welcome to the Reserve Bank.

Today, on the basis of an assessment of the current and evolving macroeconomic situation, we have decided to increase the policy repo rate under the liquidity adjustment facility (LAF) by 25 basis points to 8.0 per cent.

2. Let me first address the balance of risks that confronts us in the evolving macroeconomic outlook. The slowdown in the economy is getting increasingly worrisome. Our current assessment is that growth is likely to lose momentum in Q3 of 2013-14, with industrial activity in contractionary mode, mainly on account of manufacturing. Lead indicators of services also suggest a subdued outlook, barring some pick-up in transport and communication activity. On the other hand, agricultural performance has so far been robust, and the strong pick-up in rabi sowing indicates that this should be sustained.

RBI surprises with 25 basis points rise in Repo Rate

 

Third Quarter Monetary Policy Review 28th Jan 2014

Mr. Raghuraman Rajan, Governer of Reserve Bank of India surprised the Banking circle with

Increase in the policy repo rate under the liquidity adjustment facility (LAF) by 25 basis points from 7.75 per cent to 8.0 per cent; and consequently, the reverse repo rate under the LAF stands adjusted at 7.0 per cent, and the marginal standing facility (MSF) rate and the Bank Rate at 9.0 per cent.

But the cash reserve ratio (CRR) of scheduled bankskept unchanged at 4.0 per cent of net demand and time liability (NDTL).

The banking circle and the market was expecting the RBI Governer would keep the rates unchanged.

Following the recommendation of the Dr. Urjit Patel Committee, monetary policy reviews will ordinarily be undertaken in a two-monthly cycle, consistent with the availability of key macroeconomic and financial data. Accordingly, the next policy review is scheduled on Tuesday, April 1, 2014.

Banks not to credit "account payee" cheque proceeds to third party

In a circular issued on 22nd January 2014 the RBI has strictly prohibited the banks from crediting  'account payee' cheques to the account of any person other than the payee named therein. RBI reiterated its previous circulars and instructed that banks should strictly collect ‘account payee’ cheques only for their payee constituents.

Banks may, however, consider collecting account payee cheques drawn for an amount not exceeding Rs.50,000/- to the account of their customers who are co-operative credit societies, if the payees of such cheques are the constituents of such co-operative credit societies

Bank notes issued prior to 2005 will be withdrawn from 31st March 2014

The Reserve Bank of India has today (22nd January 2014) advised that after March 31, 2014, it will completely withdraw from circulation all banknotes issued prior to 2005. From April 1, 2014, the public will be required to approach banks for exchanging these notes. Banks will provide exchange facility for these notes until further communication. The Reserve Bank further stated that public can easily identify the notes to be withdrawn as the notes issued before 2005 do not have on them the year of printing on the reverse side.

The Reserve Bank has also clarified that the notes issued before 2005 will continue to be legal tender. This would mean that banks are required to exchange the notes for their customers as well as for non-customers. From July 01, 2014, however, to exchange more than 10 pieces of `500 and `1000 notes, non-customers will have to furnish proof of identity and residence to the bank branch in which she/he wants to exchange the notes.

The Reserve Bank has appealed to the public not to panic. They are requested to actively co-operate in the withdrawal process.

Vacancies at Reserve Bank of India

Reserve Bank of India has called applications for filling various vacancies:

Combined Advertisement for the posts of (i) Research Officers in Gr. ‘B’ for DEPR (ii) Research Officers in Gr. ‘B’ for DSIM (iii) Assistant Manager (Rajbhasha) in Gr. ‘A’ and (iv) Manager (Technical-Civil) in Gr. ‘B’

Last Date for applying is 17.02.2014

RBI directive to Banks on Loan against gold

In its directive dated 20th January 2014 the RBI has directed banks that ,

As a prudential measure, it has been decided to prescribe a Loan to Value (LTV) Ratio of not exceeding 75 per cent for banks’ lending against Gold jewellery (including bullet repayment loans against pledge of gold jewellery). Therefore, henceforth loans sanctioned by banks should not exceed 75 per cent of the value of gold ornaments and jewellery.

In order to standardize the valuation and make it more transparent to the borrower, it has been decided that gold jewellery accepted as security/collateral will have to be valued at the average of the closing price of 22 carat gold for the preceding 30 days as quoted by the India Bullion and Jewellers Association Ltd. [Formerly known as the Bombay Bullion Association Ltd. (BBA)]. If the gold is of purity less than 22 carats, the bank should translate the collateral into 22 carat and value the exact grams of the collateral. In other words, jewellery of lower purity of gold shall be valued proportionately.

NRIs as joint holders in Resident Bank Accounts

Reserve Bank of India vide its publication dated 9th January 2014 has liberalised facility to add NRI (Non-Resident Indian) close relative to be joint holder on "either or suvivor basis" in respect of all types of Resident Bank accounts (like SB / FD etc) . The guidlines are as follows:

Reserve Bank has received representations that for operational convenience the Non-Resident Indians (NRIs), as defined in Regulation 2(vi) of FEMA Notification No.5 dated May 3, 2000, may be permitted to operate such accounts on "Either or Survivor" basis. Accordingly, on a review, it has been decided that AD banks may include an NRI close relative (relatives as defined in Section 6 of the Companies Act, 1956) in existing / new resident bank accounts as joint holder with the resident account holder on "Either or Survivor" basis subject to the following conditions:

a) Such account will be treated as resident bank account for all purposes and all regulations applicable to a resident bank account shall be applicable.

b) Cheques, instruments, remittances, cash, card or any other proceeds belonging to the NRI close relative shall not be eligible for credit to this account.

c) The NRI close relative shall operate such account only for and on behalf of the resident for domestic payment and not for creating any beneficial interest for himself.

d) Where the NRI close relative becomes a joint holder with more than one resident in such account, such NRI close relative should be the close relative of all the resident bank account holders.

 

RBI releases Bhaskar panel report draft

 

 

 

 

RBI released a draft paper of the committee on financial benchmarks. RBI had announced constitution of a committee under Vijaya Bhaskar in June to study issues relating to financial benchmarks and submit the report by December 31. While the existing system was found generally satisfactory, the report recommends several measures to strengthen the benchmark quality, setting methodology and governance framework. "In line with the international move towards greater regulatory oversight of the benchmark setting process, the report reviews the existing regulatory powers of RBI over the financial benchmarks and recommends suitable amendments of the RBI Act," the banking regulator said in a press release on its website. RBI has invited public comments on the draft report.

 

 

RBI's clarification on Scribbling on Banknotes

In the wake of rumours circulating in the market that from January 1, 2014, banks will not accept banknotes with anything written on them, the Reserve Bank has urged members of public not to fall prey to such rumours and to use their banknotes without any fear. The Reserve Bank of India has clarified it has NOT issued any such instructions.

It has further clarified that it had issued instructions on August 14, 2013 only to banks advising them to instruct their staff not to scribble or write on the body of the banknotes since it was observed that the bank officials themselves were in the habit of writing on banknotes which went against the Reserve Bank’s Clean Note Policy.

Reiterating that writing or scribbling on banknotes works against its Clean Note Policy, the Reserve Bank has also sought co-operation from all members of public, institutions and others in keeping the banknotes clean by not writing/scribbling anything on them.

IINSS-C date extended

RBI in its notification dtd 30th December 2013 has extended the closing date of Inflation Indexed National Savings Securities, Cumulative 2013  from 31st December 2013 to 31st March 2014.

Inflation Indexed National Savings Securities‐ Cumulative, 2013

The Government of India will be issuing Inflation Indexed National Savings Securities-Cumulative, 2013. What are these ? Till now the deposits you used to keep with the banks and other financial instituitions will we having fixed rate of interest for a fixed tenure. They were not taking into account the Inflation factor into account. Now the government wants to give returns that is 1.5% above the rate of inflation. So you will be sure that you are beating inflation and getting a better return. Let us get to details of the offer;

1. The issue will be from December 23, 2013 to December 31, 2013. The Government of India reservers the right to close the issue earlier.

2. The issue will be in the form of Bonds.


3. The bonds may be invested by
a) An individual in his individual capacity, on joint basis, on anyone or survivor basis, on behalf of minor as father/mother/legal guardian
b) A HUF (Hindu Undivided Family)
c) “Charitable Institution” to mean a company registered under Section 25 of the Indian Companies Act 1956 OR an institution which has obtained a Certificate of Registration as a charitable institution in accordance with a law in force OR any institution which has obtained a certificate from Income Tax Authority for the purposes of Section 80G of the Income Tax Act, 1961.
d) “University” means a university established or incorporated by a Central, State or Provincial Act, and includes an institution declared under section 3 of the University Grants Commission Act, 1956 (3 of 1956), to be an University for the purpose of that act.

4. There is limit on investment. The minimum limit is Rs.5,000/- and maximum limit is Rs.5,00,000/- per applicant per year.

5. The interest on the Bonds will not get any tax benefit and hence is taxable under Income Tax Act, 1961 according to relevant tax status of the bond holders.

6. The bonds will be issued at par. Minimum amount of Rs.5000 (face value) and in multiples thereof.

7. The applications can be made in cash/draft/cheque/online through internet banking. The cheques and drafts should be in favour of the bank (receiving office) and payable at the place where the application is tendered.

8. The date of issue of bonds will be date of receipt of funds/realization of draft/cheque at the receiving office.

9. The bonds will be issued in the form of Bonds Ledger Account (BLA) and held with Reserve Bank of India. A certificate of holding in specified form will be issued to the holder of bonds.

10. The applications for the bonds in the form of Bonds Ledger Account will be received at
a) Branches of State Bank of India, Associate Banks, Nationalised Banks, three private sector banks (i.e. HDFC Bank Ltd., ICICI Bank Ltd., AXIS Bank Ltd.) and SHCIL during their working hours.
b) Any other bank or number of branches of the banks and SHCIL where the applications will be received as specified by the Reserve Bank of India in this behalf from time to time.

11. The nomination facility for the bond holders are available.
a) A sole holder or a sole surviving holder of a Bond(s), being an individual, may nominate in the Form annexed to this notification or as near thereto as may be, one or more persons who shall be entitled to the Bonds and the payment thereon in the event of his/her death.
b) Where any amount is payable to two or more nominees and either or any of them dies before such payment becomes due, the title to the Bonds shall rest in the surviving nominee or nominees and the amount being due thereon shall be paid accordingly. In the event of the nominee or nominees predeceasing the holder, the holder may make a fresh nomination.
c) No nomination shall be made in respect of the Bonds issued in the name of a minor.
d) A nomination made by a holder of Bonds may be varied by a fresh nomination as near thereto as may be, or may be cancelled by giving notice in writing to the Receiving Office in the Form annexed to the notification.
e) Every nomination and every cancellation or variation shall be registered at the Reserve Bank of India through the authorised bank and shall be effective from the date of such registration.
f) If the nominee is a minor, the holder of Bonds may appoint any person to receive the Bonds/amount due in the event of his/her death during the minority of the nominee.

12. The bonds shall be transferable to nominee (s) on the death of holder (only individual/s)

13. The bonds will bear interest at the rate of 1.5% (fixed rate) per annum + inflation rate calculated with respect to final combined Consumer Price Index [(CPI) Base; 2010 = 100]. Final combined CPI will be used with a lag of three months to calculate incremental inflation rate (i.e. final combined CPI for September would be used as reference CPI for all days of December). Interest will be compounded with half‐yearly rests and will be payable on maturity along with the principal.

14. The bonds are not traded in secondary market. The good point is that the bonds can be kept as collateral with the banks to get loans frombanks, Financial Institutions and Non‐Banking Financial Company (NBFC). The lien to that effect will be marked in the depository (RBI) by the authorised banks.

15. The bonds are repayable on expiration of 10 years from the date of issue. The investor will be advised by the authorised bank one month before maturity regarding the ensuing maturity of Bonds advising them to provide a Letter of Acquaintance, confirming the NEFT/NECS account details, etc. to the authorised bank. If everything is in order, the investor will be paid within maximum five days of the maturity.

16. Premature repayment/redemption before the maturity date is allowed after one year of holding from the date of issue for senior citizens, i.e. 65 and above years of age and for all others, after 3 (three) years of holding, subject to the penalty charges at the rate of 50% of the last coupon payable. Early redemption to be allowed only on coupon date.

Your Credit Card dues and NPA status

The Reserve Bank of India in its notification dated 20th December 2013 has advised that a credit card account will be treated as NPA (Non-Performing Asset) if the minimum amount due as mentioned in the credit card statement for the month is not paid fully within 90 days from the next statement date. It has also clarified that the gap between the two statements should not be more than a month.

Guidelines soon on pre-paid payment instruments

The Reserve Bank of India plans to permit scheduled commercial banks with the eligibility criteria to issue all categories of pre-paid payment instruments and eligible non-bank entities, including NBFCs, to issue semi-closed instruments. The move is to promote cashless transactions. The Reserve Bank had earlier placed the draft guidelines for issuance and operation of such instruments in public domain for wider dissemination and feedback. Instruments such as smart card, Internet account, mobile account and mobile wallet could be some of the pre-paid payment instruments, the RBI Deputy Governor, Ms Shyamala Gopinath, said.

‘No prior approval needed to set up offsite ATMs’

In a move that would allow banks to expand their ATM networks more easily, the Reserve Bank of India has done away with the requirement of prior regulatory approval for setting up offsite ATMs. RBI had earlier dispensed with the requirement of obtaining regulator permission for onsite ATMs (ATMs at branch premises).

RBI's Annual Policy Statement - 2009-10

Consistent with the current assessment of macroeconomic and monetary conditions, the Reserve Bank has decided to: 1) reduce the repo rate under the LAF by 25 basis points from 5.0% to 4.75% with immediate effect. 2) reduce the reverse repo rate under the LAF by 25 basis points from 3.5% to 3.25% with immediate effect. 3)keep the CRR unchanged at 5.0% of net demand and time liabilities (NDTL).