Central Bank unveils limited period deposit scheme

Central Bank of India has launched a new limited period deposit scheme – Cent 101, to mobilise up to Rs 3,000 crore, for a short-term requirement of the bank.

Announcing the launch here, B. Akbaraly, Zonal Manager (South Zone), Central Bank of India, said in the last couple of days of soft launch, the bank managed to mobilise Rs 58 crore. “Our target is to collect at least Rs 560 crore before the end of March 31, from the Tamil Nadu and Kerala markets alone,” he said.

Elaborating on the scheme, R. Thiagarajan, Deputy General Manager of the bank, said the bank will pay 8.55 per cent interest, which is the highest in the industry. For senior citizens, it offers 9.05 per cent.

Minimum amount that can be deposited is Rs 1,000, thereafter in multiples of Rs 1,000 and the maximum limit is Rs 10 crore.

Earlier, the bank came out with a similar plan for 555 days – Cent 555, which was a great success, said Akbaraly.

HYBRID CARD:

The bank is also proposing to come out with a hybrid card, which will work as an usual debit card as long as the individual has balance in his bank account. Once the credit balance is exhausted by the individual, the card will automatically turn to be a credit card, he explained.

As on December 31, 2012, the bank has crossed 3.5 million debit card base. It has plans to launch co-branded debit, credit and pre-paid cards with several corporates.

The bank, being a late entrant to the ATM system segment, had only around 1,000 ATMs across the country by the end of 2011-12. In the current financial year, so far, it crossed the 2,000-mark. “In the next two months, we are planning to install another 500 ATMs across cities, to take the total to 2,500 by the end of the current financial year.

Vijaya Bank’s new credit cards target high net-worth individuals

Vijaya Bank has launched two credit cards ‘V-Platinum’ and ‘V-Privilege’ targeted at high net worth individuals (HNIs) and term deposit holders.

Launching the credit cards, H.S. Upendra Kamath, Chairman and Managing Director, said “We have set a target to issue 10,000 ‘V-Platinum’ cards and 5000 ‘V-Privilege’ by the end of this calendar year”

“The bank has issued around one lakh ordinary credit cards and has exposure of Rs 29 crore. But due to debit card, credit cards were not popular, hence today we have launched a variant of credit card targeted at HNIs and term deposit holders,” he added.

Vijaya Bank has drawn up a plan to issue both the credit cards by utilising the services of its 12,000 employee based and through its 1333 branches.

Amendments to Regional Rural Banks (RRBs) Act, 1976

The Union Cabinet today gave its approval to the proposed amendments in the Regional Rural Banks (RRBs) Act, 1976 to enhance authorized and issued capital to strengthen their capital base. The term of the non official directors appointed by the Central Government is proposed to be fixed not exceeding two years. 

The proposed amendments will ensure financial stability of RRBs which will enable them to play a greater role in financial inclusion and meet the credit requirements of rural areas and the Boards of RRBs will be strengthened. 

Background 

Regional Rural Banks (RRBs) were established under Regional Rural Banks Act, 1976 (the RRB Act) to create an alternative channel to the `cooperative credit structure and to ensure sufficient institutional credit for the rural and agriculture sector. RRBs are jointly owned by the Government of India, the concerned State government and sponsor banks, with the issued capital shared in the proportion of 50 percent, 15 percent and 35 percent, respectively. As per provisions of the Regional Rural Banks Act, 1976 the authorized capital of each RRB is Rs. 5 crore and the issued capital is a maximum Rs. 1 crore. 

Cheque Truncation System (CTS)

It is one of the major innovations in cheque clearing after the Magnetic Ink Character Recognition (MICR) cheques introduced in the 80s. Cheque truncation is a system between clearing and settlement of cheques based on electronic images.

This form of clearing does not involve any physical exchange of instrument. Bank customers would get their cheques realised faster as local cheques are cleared almost the same day as the cheque is presented to the clearing house, while intercity clearing happens the next day. Besides speedy clearing of cheques, banks also have additional advantage of reduced reconciliation and clearing frauds. It is also possible for banks to offer innovative products and services based on CTS.

Why is it needed:

Though MICR technology helped improve efficiency in cheque handling, clearing is not very speedy as cheques have to be physically transported all the way from the collecting branch of a bank to the drawee bank branch. The CTS is more advanced and more secure. Many countries have sought to address this issue with cheque truncation, in which the movement of the physical instruments is curtailed at a point in the clearing cycle, beyond which the process is completed, purely based only on the electronic data and images of the cheques.

What has been the international experience in this regard:

Denmark and Belgium are pioneers in CTS. They adopted complete cheque truncation system more than two decades ago. Sweden is the typical example for having achieved complete truncation where all the cheques can be presented and encashed at any branch; irrespective of the bank on which they are drawn. CTS also takes care of the needs of future electronic transactions.

What has RBI and banks done:

RBI has already enabled CTS to be fully functional in New Delhi. Soon even cheque clearing in Chennai will be settled through CTS. Banks have also taken steps to introduce appropriate technology to facilitate this system.

What are the salient features of CTS?

The physical cheque is truncated within the presenting bank itself. Settlement is generated on the basis of current MICR code line data. These images will be archived electronically and be preserved for eight years. A centralised agency per clearing location will act as an image warehouse for the banks.

Inter-Bank Mobile Payment Service

Inter-Bank Mobile Payment Service (IMPS) offers an instant, 24X7, interbank electronic fund transfer service through mobile phones. There are two types of IMPS services: A personto-person (P2P) service and a person-to-merchant (P2M) service. While the P2P service was launched some 18 months ago, P2M service was made available only recently.

HOW TO START A P2P OR P2M SERVICE:

Register your mobile number with your bank. Get a seven-digit Mobile Money Identifier, or MMID, number. This number is used to identify your bank and is linked to your account number. The combination of mobile number and MMID is unique for particular account, and the customer can link the same mobile number with multiple accounts in the same bank, and get separate MMID for each account. After this, get a Mobile Banking PIN, or M-PIN, which is a password to be used during transactions for authentication and security. Download mobile banking application or use the SMS facility provided by the bank to make a payment.

HOW TO SEND OR RECEIVE FUNDS FOR P2P TRANSACTIONS:

To send money, initiate an IMPS transaction using the mobile app or SMS. You need to enter the beneficiary's mobile number and MMID, amount and M-PIN for initiating a transaction. You will then receive a confirmation SMS for the transaction. To receive money, share your mobile number and MMID with the sender. The sender then initiates the above-mentioned steps. And you get an SMS confirmation for the money received.

HOW DOES THE P2M SERVICE WORK:

There are two ways in which P2M transactions can be performed: customerinitiated transactions (P2M PUSH) and merchantinitiated transactions (P2M PULL). P2M push transactions can be used for paying insurance premium, mobile /DTH recharge, credit card fee, utility bills, over-the-counter payments, and face-to-face payments such as pizza delivery, couriers and cabs. For P2M PUSH, a customer initiates transaction through the mobile banking app or SMS facility provided by the bank. For P2M PULL, the transaction is initiated through the website of the merchant. Plus you need to get a one-time password (OTP) from your bank.

IS THERE A CASH LIMIT:

Yes. Most banks cap the daily limit via IMPS app at Rs 50,000 per day. SBI limits transfers to Rs 1,000 per day through the SMS mode.

SBI ties up with Shriram Automall

State Bank of India (SBI) has entered into a pan-India tie-up with Shriram Automall India Ltd, a subsidiary of Shriram Transport Finance Company, for assisting in post-seizure, warehousing and sale of seized tractors through organised public sale.

SBI, in a statement said, the tie-up would help the company in better price recovery of impaired assets in the form of tractor loans, as Shriram Automall will offer end-to-end solution through more than 65 auto malls.

The auto mall offers a common meeting platform for potential buyers and sellers where the valuation of the vehicle is determined through a transparent process.

“It is expected that a large number of non-performing tractor loan accounts would be addressed through this tie-up in the coming months. Apart from ensuring optimum recovery from the sale of old tractors, this tie-up is expected to create a market for pre-used tractors also where SBI may explore lending opportunities,’’ the bank said.

42% workers are now ‘middle-class’: ILO report

The middle class is rising in a big way, especially in developing countries. About 42 per cent of workers, or nearly 1.1 billion, are now ‘middle-class’, living with families on over Rs 225 ($4-13) per person per day, says a new ILO report.

By 2017, the developing world could see the addition of 390 million more workers in the middle class, the International Labour Organisation (ILO) report says.

“Over time, this emerging middle-class could give a much needed push to more balanced global growth by boosting consumption, particularly in poorer parts of the developing world,” said Steven Kapsos, one of the authors of the Global Employment Trends 2013.

Employment growth

However, the report raises a red flag for employment growth in 2013-14, even if there is a moderate pick-up in output growth.

It estimates that the number of unemployed worldwide may rise by 5.1 million to more than 202 million in 2013 and by another 3 million in 2014, half-a-million of which will be youth.

“The indecision of policy-makers in several countries has led to uncertainty about future conditions and reinforced corporate tendencies to increase cash holdings or pay dividends rather than expand capacity and hire new workers,” says the report.

GDP growth

The ILO report noted that in India, growth in investment contributed 1.5 percentage points to the overall GDP growth over the past year, down from 1.8 percentage points in 2011, while the contribution from consumption declined to 2.8 per cent versus 3.2 per cent the previous year.

Job creation, labour productivity

For countries such as India, the report called for focus on both employment creation and labour productivity.

It noted that in India, even where jobs were created, a large number of workers remained in agriculture (51.1 per cent), in the urban informal sector or in unprotected jobs (contract) in the formal sector.

The share of workers in manufacturing was just 11 per cent in 2009-10, no higher than a decade earlier.

Like many regions, growth has failed to deliver a significant number of better jobs in the formal economy.

Formal employment

Most notably in India, the share of formal employment has declined from around 9 per cent in 1999-2000 to 7 per cent in 2009-10, in spite of record growth rates, it said quoting a study.

Using a comparable definition for the latest year available, the report said the share of workers in informal employment in the non-agricultural sector stood at 83.6 per cent in India (2009-10), 78.4 per cent in Pakistan (2009-10) and 62.1 per cent in Sri Lanka (2009).

Significantly, the report noted that unemployment rates increased rapidly for high-skilled workers, especially women.

“Indians with a diploma suffer particularly, with unemployment rates reaching 34.5 per cent for women and 18.9 per cent for men during 2009-2010,” it added.

RBI hikes FII limit in Govt securities, corporate bonds by $5 billion

The Reserve Bank today hiked FII investment limits in Government securities and corporate bonds by $5 billion each, taking the total cap in domestic debt to $75 billion, with a view to bridging the current account deficit.

Further liberalising the norms, the three-year lock-in period for foreign institutional investors (FIIs) purchasing Government securities (G-Secs) for the first time has been done away with, RBI said.

The sub-limit of $10 billion for investment by FIIs and long-term investors in G-Secs stands enhanced by $5 billion, it said.

The limit in corporate debt, other than infrastructure sector, stands enhanced from $20 billion to $25 billion, RBI said.

With an increase of $5 billion in each of the two categories, FIIs and long-term investors can now invest $25 billion in G-Secs and $50 billion in corporate debt instruments, taking the total to $75 billion.

The earlier FII investment limit in G-Secs was $20 billion and for corporate debt it was $45 billion, including a sub-limit of $25 billion for infra bonds.

RBI further said: “Residual maturity condition shall not be applicable for the entire sub-limit (in G-Secs) of $15 billion but such investments will not be allowed in short-term paper like Treasury Bills, as hitherto”.

The overall FII limit of domestic debt is distributed through a host of categories across Government, corporate and infrastructure debt.

Long-term investors include sovereign wealth funds, multilateral agencies, pension funds and foreign central banks.

Government, which is battling a high current account deficit (CAD) — the gap between inflows and outflows of foreign funds — is trying to attract more foreign funds into the country.

The CAD touched a record high of 5.4 per cent in the July-September quarter of the current fiscal.

In order to check the outflow of foreign currency, the Government recently hiked the import duty on gold and also took steps to encourage mutual funds to park their gold in deposit schemes offered by banks.

As a measure of further relaxation, the RBI added that it had dispensed with the one-year lock-in period on holding infrastructure bonds.

Developing nations top global FDI index for first time in 2012: UN

Developing countries overtook their traditionally wealthier counterparts in attracting foreign direct investment for the first time last year, as industrialised nations bore the brunt of an 18 per cent plunge in FDI flows, the UN’s trade and investment think tank Unctad has said.

Last year, global foreign direct investments — when a company in one country invests for instance in production facilities or buys a business in another country — came in at $1.3 trillion, down from $1.6 trillion in 2011, Unctad’s Global Investment Trend Monitor showed.

In a dramatic shift on the global investment scale, developing countries reaped $680 billion of that, or 52 per cent of the total.

“For the first time in history, developing countries have attracted more investment than developed countries,” James Zhan, who heads UNCTAD’s investment and enterprise division, told reporters in Geneva.

The shift was largely prompted by evaporating investments in crisis-hit developed economies like the United States, European nations and Japan, which accounted for 90 per cent of the $300 billion-decline in global FDI last year, Zahn said.

“We thought we were on the way to a steady recovery, (but) the recovery has derailed,” added Zahn, who pointed out that global investment figures had turned upwards in 2010 and 2011. But amid growing market uncertainty, they fell last year to near the historic low of $1.2 trillion which came during the worst of the global financial crisis in 2009.

The US, which remains the world’s largest recipient of foreign direct investment, saw its FDI inflows slip more than 35 per cent to $147 billion, while Germany saw its net investment level plunge from $40 billion in 2011 to just $1.3 billion last year, mainly due to large divestments there.

“Developing countries also suffered from the global decline,” Zhan said, “but the decline was much more moderate.”

Asia, which raked in 59 per cent of all FDI to developing countries, saw its inflows dip 9.5 per cent, with China, the world’s second-largest recipient of such investments, registering a 3.4-per cent drop in 2012 to $120 billion.

South America and Africa meanwhile registered positive growth in FDI flows last year.

Last year’s overall drop in investments came despite the fact that the global economy grew 2.3 per cent in 2012, while worldwide trade was up 3.2 per cent.

Going forward, Unctad expects FDI flows to rise to just $1.4 trillion this year and to $1.6 trillion in 2014 — still far below the 2007 pre-crisis level of some $2.0 trillion in investments.

IMF: World Economic Growth Rate would be 3.5 percent in 2013

nternational Monetary Fund (IMF) in at update to World Economic Outlook (WEO) on 23 January 2013, projected that the global economic growth rate would be 3.5 percent in 2013. The update mentioned that the global economic growth would strengthen gradually as the limitations of the economic activities have seen a positive note with the start of the year.

Some of the major projections of IMF are

•    Global growth would reach 3.5 percent in 2013, from 3.2 percent in 2012
•    Crisis risks would narrow down but the downside risks will remain crucial
•    Main sources of growth would be the emerging markets, developing countries and the United States

Reasons that may be beneficial in betterment of the economic growth

•    The actions taken in policy making have been responsible in reducing the risk of the acute crisis situation faced in the area and the United States.
•    Actions in terms of plans taken by Japan would also be beneficial in pulling it out from a short-lived recession kind of condition.
•    The policies made by the emerging economies of the world in terms of policy making is has also shown positive outcomes with a good start in the year

The report also described that if the risks of crisis doesn’t materialize, then the expected targets of growth may be crossed and can be stronger then that is projected.

Thing that can show an impact, the growth or result into the downfall

•    Fiscal tightening, if crosses an excessive limit in United States it may have an adverse impact on the economic growth
•    Long-term stagnation of the euro-area would also have an adverse impact

Situations that hinted towards improvement in economic conditions

The economic conditions of the world had shown a positive movement in the third quarter of the 2012 and this was change brought by the performance displayed on the economic front by the emerging economies of the world as well as United States. The borrowing cost of the countries in Euro Zone was marginally better than expected but it also identified some of the weaknesses in the core Euro area. Japan was under the effect of recession in the second half of 2012, which had shown positive signs of improvement in the running year.

Forecasts and the Expected Changes

•    In terms of Euro Zone, IMF managed to downgrade its forecast as this economic situation of the region may contract a bit n 2013.
•    The report also observed slight improvement in the financial conditions of the banks and governments of the Periphery economies, occurred due to the policy actions undertaken by them but these economies has yet not improved in terms of the borrowing conditions in private sector.
•    In terms of United States, the forecast remained broadly unchanged to that of the of October 2012 WEO to 2 percent, but predicted that the support offered to the financial market would support the growth in consumption in the country
•    In terms of Japan, the near-term outlook has also remained unchanged regardless of the recession witnessed by the country in recent past and it’s expected that the monetary easing and incentive package would boost the growth in the country
•    The report projected that the developing economies and the emerging market of the world would grow by 5.5 percent in 2013 and it will remain almost same as it was predicted in October 2012 WEO.
•    In case of China, the IMF has forecasted a growth rate of 7.8 percent, 8.2 percent and 8.5 percent in 2012, 2013 and 2014 respectively. In 2011, it witnessed a growth rate of 9.3 percent.

Findings of the report and threats

•    Following the findings of the report in detail, it’s projected that the Euro Area is one of the biggest threat to the Global Economic Outlook as it poses a downside risk to the economy. If the momentum of reforms is not maintained in the Euro Area than the risk of prolonged stagnation would increase
•   To move ahead of the risk factor, adjustment programs from the periphery countries should continue and be supported by the firewall developments for prevention of the contagion and take steps towards banking union and fiscal integration, the report stated.
•   In case of United States, excessive fiscal consolidation in short term should be avoided and it should raise the debt ceiling and should move ahead to identify a credible medium-term fiscal consolidation plan, that focuses towards entitlement and tax reform.
•    In context of Japan, the report identified that it should find out a medium-term fiscal strategy as lack of such an strategy can bring risks to the stimulus package to it
•  The developing nations and emerging economies need to make fine policies to tackle the of rising domestic imbalances

The overall decrease in the forecast for the global economic growth rate is the result of the economic slowdown witnessed by the world due to the Euro Zone Crisis in existence. The Euro Zone crisis had an adverse impact on the export and import of the world, leading to great set-backs to the emerging economies of the world as well as the developed economies. Before, Euro Crisis the world also suffered from the recession that hit the United States of America in 2009. Japan also witnessed an economic slowdown after the Tsunami that hit the country in 2011 and affected the Fukushima nuclear Plant.