Economic survey favours more liberalization

Indian Economic Survey 2007-08– which is a report card on the Indian economy ahead of the Union Budget– has favoured more liberalization and reforms. The Survey contains Policy options which may not necessarily translate into actual policy, or form a part of the Union Budget due to pressures of government’s leftist allies . It however, provide clues to medium-term policy direction the government needs to take.

In case of insurance sector, the Survey recommended raising foreign equity share to 49 per cent, while prescribing 51 per cent foreign equity in a special category of insurance companies – those providing all types of insurance such as health and weather, to rural residents and for all agricultural related activities including agro-processing.

In the banking sector, the Survey favoured allowing 100 per cent FDI in greenfield private rural-agriculture banks. Such a bank would be free to set up any number of branches in any rural or semi-rural area, the Survey said, adding that it would be free to lend agriculture and allied sectors anywhere in the country and to any industry located in non-urban area.

Survey pushes for reviving the disinvestment process, which has been put on the back burner under communist pressure. Survey has asked the government to complete divestment of 5-10 per cent stake in previously identified profit making non-Navratna PSUs.

While advocating FDI in all retail trade, suggested allowing a share for foreign equity in all retail trade, and mooted 100 per cent foreign equity in foreign branded, specialised retail chains like luxury brands, consumer durables, and semi-durables.

Facing a slowdown in the face of a sluggish growth in developed economies, especially in the US, the government will need to find a way out to implement the policy options suggested by Economic Survey to sustain the 9 per cent rate of economic expansion.

On-screen Keyboards a boon to online security

Online security was always seen as a deterrent to many users. In fear of losing the online information to somebody else, the greater threat is when the information concerns about your bank account.

Moreover it is easy for hackers to steal information from newbies. The easiest options for them are to send 'trojans' or 'keyloggers' (programs that record what a user is typing on his keyboard, login information in this case, and send it back to the hacker) and phishing (setting up of genuine-looking, dummy websites to fool users into parting with information). Most security-related programs like anti-virus software overlook these programs as the code is not necessarily like that of a virus.

Recently some banks adopted another technology to combat the issue. It is no rocket-science, but a very smart application of the old scripting language that web-wizards use in their websites. Termed as the Virtual Keyboard, this application nearly eliminates the use of the keyboard while logging into their websites. Users have to type on the keyboard displayed on the screen using their mouse, thus rendering 'keyloggers' useless.

CSR in Banking

It is high time that India becomes proactive on Sustainable Development. Awareness of terms like Sustainable Development and Corporate Social Responsibility is relatively low in India vis-a-vis the rest of the world. Global warming and climate change are particularly important in the context of sustainable development, especially for developing countries. The role of financial institutions in sustainable development is very crucial as they finance the economic and developmental activities of the world.

Now the RBI has taken initiatives for creating awareness. They have told banks to undertake CSR initiatives for sustainable development. Accordingly, banks are supposed to give an account of their intangible assets (non-financial reports) and place them in public domain. Non-financial reporting is a system of reporting by organisations on their environmental, social and economic accounting activities.

Has RTGS option become popular?

Success of any new product depends on the usage and acceptance from the customers/endusers. Presently success of products like RTGS is seen in volume terms and not by the transaction numbers. Minimum amount of Rs 1 lac , additional charges and lack of awareness of RTGS may be hindering the success of this product.Banknet's Customer Survey on Payment Systems attempts to determine the awareness and acceptance levels of various funds transfer options among the end-users.

An Indian is now top banker

Vikram Pandit, is the youngest person to become the CEO of Citigroup. A master in electrical engineer by degree, Vikram switched to the financial field to make a mark in Morgan Stanley. A year ago, Vikram had founded Old Lane, a hedge fund focused on real estate and infrastructure opportunities in India, right after leaving the top executive position at Morgan Stanley. Citigroup later bought out the company (for a whopping $600 to $800 million) to offer the key people in Old Lane jobs in Citigroup’s Alternatives business. And within six months, Vikram got the CEO’s position at Citigroup. The 50-year old Indian, has certainly made India proud.

Beware of email-frauds

We all get a number of mails asking for help in transferring their millions of dollars to India - showing an opportunity for earning huge commissions. These mails that usually are from Nigeria or other African countries asking for help by using your bank account for the funds transfer. Every week we also win million of dollars in lotteries. Internet servers mark these messages (and we should regard too as) spam.

However, there is a new turn to these mails. Now to show authenticity, they are using the name of India's central bank, the RBI, into the picture. They claim that huge sums of money for disbursal of loans in India at cheap rates have been kept in an account with the Reserve Bank. In these lines, the RBI has 'refuted' these claims and has cautioned the general public against following prey to these fake e-mails.

Other-bank ATM transaction fees got lower

The Institute for Development and research in Banking Technology (IDRBT) recently announced that it has removed the inter-bank ATM switching fees. What this means is that when you transact at an ATM that is not owned by your bank ("other-bank" ATM), your bank saves the two Rupees per transaction it would otherwise had to pay to IDRBT to connect to the other bank's infrastructure. So the direct benefit is to the bank. We can now expect this benefit to pass on to the customer, by way of reducing the inter-bank ATM transaction charges. Also, banks with a smaller ATM network can also join the Switch enjoying lower transaction fees for its customers.

Good news for Bank Customers

The RBI has now decided to intervene in the recovery formula of banks - a system that concerns people who have taken bank loans more than their repayment worries. RBI feels that the system could risk the reputation of the banking sector as a whole. Therefore, banks are now urged to follow prescribed specific considerations, which currently are in the making, while engaging recovery agents.

Post this regulation, if found that recovery agents are harassing customers, Reserve Bank may consider imposing a ban on a bank from engaging recovery agents in a particular area, either jurisdictional or functional, for a limited period; and can also attract penalties against any bank or its Directors/ Officers/ agents in this regard.

While these guidelines are in draft, customers can also give their feedback on the same to RBI.

Customer Satisfaction lower in metros

Recently, McKinsey & Co. released a study on the Indian Banking System. According to the study, the IT effectiveness of some leading Indian banks is better than that of banks abroad.

The study also finds the level of customer satisfaction in Indian metros is lower than that in rest of Asia. Banks' IT infrastructure in the past year has been focused on implementing Know Your Customer (KYC) as per Basel II guidelines. So does the 'effective IT infrastructure' fall back on satisfying Indian customers? Or do Indians (in the metros) demand 'something more' out of banks that the banks aren't (yet) able to deliver?

Is Insurance a Savings Instrument?

An increase in the disposable income of Indians has led to an upswing in the lifestyle of people. A growing need for insurance has also been observed, as more families are dependent on only one earning member.

There are two types of life insurance - term plans, which are the simplest and cheapest form of risk cover, and savings based plans, where one can expect returns after a period. The number of savings based plans have recently been on the increase.

People are viewing it as an investment instrument; like market-based Unit Linked Insurance Plans (ULIP) as equivalent to another Mutual Fund. But it is not entirely their fault. Insurance Advisers are 'misguiding' them into buying these savings based plans as investments with an added benefit of risk cover, instead of the other way round.

However, consumers need to keep in mind that most of these plans are beneficial (both risk-cover as well as returns wise) only in the long term, though most insurance agents push them as only a 'three-year' investment. Incidentally, neither ULIPs nor Mutual Funds 'guarantee' returns.

An ideal way of insuring, as most financial planners would put it, would be to buy simple term plans for life risk cover and diversified investment of the rest of the savings in other instruments like mutual funds, public provident funds, and bank deposits.

Who's guarding your ATM?

ATMs are now the most used touch-point between the bank and the customer. The security measures at an ATM are far lesser than that found at a bank branch. ATMs are equipped with either a camera or a watchman, and rarely both, let alone any additional measures. This brings us to the question, that as an individual, is transacting at ATMs really secure?

Complex frauds like card swapping and card jamming are unheard of in India. The first few things that come to the mind on ATM frauds are card theft, PIN theft and mugging.

Unlike in case of credit cards, ATMs need a two factor authentication (1: the card, and 2: the PIN or any biometric identification) to operate. A two factor authentication is necessary for added security. PIN thefts are formed mostly out of customers casually disclosing the said code to, say, drivers or relatives to withdraw money for them. The bank pretty much cannot control these factors - these are left for the consumer to handle. Banknet's Report on the Indian ATM Industry has mentioned a few tips on how to prevent such frauds and other precautionary measures to be taken while at an ATM.

Still, robbing or mugging leaves some fraud issues unanswered. Hiring guards has been generating controversy. It is observed that customers usually ask these guards for assistance in case they face any problems. This tempts banks to train these guards to help such customers in need. However RBI feels that these 'self-service' terminals should not involve assistance from any such 'third parties' who may themselves stand as potential threats to customer safety.

Tell us what you think. Do we need guards at ATMs? If not, what should be the solution?