Opening bank account may become easier

Reserve Bank of India has clarified to banks that permanent correct address, means the address at which a person usually resides and can be taken as the address as mentioned in a utility bill or any other document accepted by the bank for verification of the address of the customer.

However,banks can also accept an identity document and a utility bill of the relative with whom the prospective customer is living along with a declaration from the relative that the said person (prospective customer) wanting to open an account is a relative and is staying with him/her. Banks can use any supplementary evidence such as a letter received through post for further verification of the address.

RBI has reitrated that the adoption of customer acceptance policy and its implementation should not result in denial of banking services to general public.

Mortgage Guarantee cos entry may soften home-loan rates

Finally Reserve Bank of India has allowed mortgage guarantee companies to commence the business of providing mortgage guarantee in India. Mortgage guarantee firms would provide guarantee to a home loan lending institution against default. This will provide a cushion to banks and financial institutions.

Since a mortgage guarantee company will provide guarantee against any default, bankers risks will go down. At present, bad loans account in home loan is quite low. So, the cost of buying insurance from the mortgage guarantee company may not be very high. This may result in decline in home loan rates and increase credit flow to the housing sector.

Trade Associations' Disappointment on No Interest Rate Reduction

Recently RBI released its Third Quarter Review of Annual Statement on Monetary Policy for 2007-08. In the review, RBI was expected to cut rates in view of the slowing industrial growth. But the reluctance to do so has disappointed trade associations in India.

FICCI President, Mr. Habil Khorakiwala, expressed his views in this context of the slowdown in industrial growth. He mentioned that RBI could have revised and fine-tuned the interest rates, to sustain a high rate of economic growth. The RBI could have shifted its emphasis from controlling inflation to sustaining the overall growth momentum.

Similar reactions were received from ASSOCHAM President, Mr. Venugopal N. Dhoot. He said the reluctance in the interest rates cut would make it difficult for the various industry segments to cope with the slackening demand, rising imports and high borrowing cost. The economy is not prepared for copious capital inflows which would arise with increasing FIIs and ECBs taking advantage of interest rate differences between India and developed economies of US and Europe.

Industrial growth in November this year was at 5.3% compared to 15.3% in the previous year. Along with the rising rupee, high interest rates have taken a big toll on the small and medium enterprises - which in absence of funding from equity markets and competition from cheaper imports, is bearing the maximum brunt of the slowdown in demand and expensive domestic funds.

Will banks invest in new ATMs ?

Reserve Bank of India feels that cost effective access to ATMs will encourage usage of ATMs and want banks to reduce the Service charges for ATMs and soon phaseout all fees. This is good news for customers.

But in future banks may not be interested in investing in new ATMs. Even maintaining present ATM networks may become unviable for banks. So rationalization & transparency in rates is need of the hour for a increased usage of ATMs, not phasing out of fees.

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.

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.