No late Fees charges for delay in credit card payment for 3 days :RBI

RBI has said that henceforth banks can levy a penalty on a credit cardholder only if they fail to receive payment for three days after the due date. The directive will benefit those whose payment or transfer gets delayed due to a bank holiday or for any other reason. 

Besides not charging penalty, RBI has said that banks should also report delayed payment to credit information companies like Cibil only when a credit card account remains 'past due' for more than three days. At present all banks state that late payment charges are applied if payment is not made by due date. The late payment charges vary between Rs 100 to Rs 700 depending on the total payment due. 

Although earlier RBI had issued a directive stating that the next statement date should be the reference date for computing penalties and reporting defaults to credit bureaus banks have continued to use the due date for imposing late fee. 

In a circular issued to all banks RBI said that in order to bring in greater credit discipline as also to provide operational flexibility to credit card issuers, 'past due' status of a credit card account for classifying bad loans would be reckoned from the payment due date mentioned in the monthly credit card statement. "Consequently, in case of banks, a credit card account will be treated as non-performing asset if the minimum amount due, as mentioned in the statement, is not paid fully within 90 days from the payment due date mentioned in the statement," RBI said. 

"However, banks shall report a credit card account as 'past due' to credit information companies (CICs) or levy penal charges, viz. late payment charges only when a credit card account remains 'past due' for more than three days. The number of 'days past due' and late payment charges shall, however, be computed from the payment due date mentioned in the credit card statement," RBI said. Earlier it was to be classified as NPA if payment was not received within 90 days of next statement date.

Complete Circular is given here under for your ready reference 

RBI/2015-16/126

DBR.No.BP.BC.30/21.04.048/2015-16

July 16, 2015

All Scheduled Commercial Banks/Non-Banking Financial Companies/Primary (Urban) Co-operative Banks

Dear Sir,

Prudential Norms on Income Recognition, Asset Classification and

Provisioning pertaining to Advances – Credit Card Accounts

Please refer to circular DBOD.No.BP.BC.78/21.04.048/2013-14 dated December 20, 2013 on the captioned subject.

2. In order to bring in greater credit discipline as also to provide operational flexibility to credit card issuers, it has been decided that, with effect from the date of this circular, ‘past due’ status of a credit card account for the purpose of asset classification would be reckoned from the payment due date mentioned in the monthly credit card statement. Consequently, in case of banks, a credit card account will be treated as non-performing asset if the minimum amount due, as mentioned in the statement, is not paid fully within 90 days from the payment due date mentioned in the statement.

3. However, banks shall report a credit card account as ‘past due’ to credit information companies (CICs) or levy penal charges, viz. late payment charges, etc., if any, only when a credit card account remains ‘past due’ for more than three days. The number of ‘days past due’ and late payment charges shall, however, be computed from the payment due date mentioned in the credit card statement.

Yours faithfully,

(Sudarshan Sen)

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RBI advances timing for RTGS business hours

“It has hence been decided to advance RTGS business hours to from and extend closing time of RTGS to on week days.RTGS business window will be open from hours to on Saturdays,” RBI said in a notification.

The new working hours will be with effect from December 29, 2014.

Extension of RTGS time window

RBI/2014–15/352
DPSS (CO) RTGS No. 1064 / 04.04.002 / 2014-15

December 15, 2014

The Chairman / Managing Director / Chief
Executive Officer of participants of RTGS

Madam / Sir,

Extension of RTGS time window

1. It has been the endeavour of the Reserve Bank of India to keep enhancing the systems, procedures, etc. to meet the growing needs of the markets/ customers. The launch of the new RTGS system in October 2013 was one of the steps taken by the Bank for catering to the growing volume and to provide liquidity saving and other features of the new system to the members.

2. Of late there has been a market demand for extending business hours of the RTGS system to facilitate customer and inter-bank transactions as also to facilitate other market obligations to settle in the RTGS system. Accordingly, the RTGS business hours are being revised to meet the market expectation.

3. It has hence been decided to advance RTGS business hours to 8:00 hours from 9.00 hours and extend closing time of RTGS to 20.00 hours on week days. RTGS business window will be open from 8.00 hours to 15.30 hours on Saturdays.

4. In view of the above, the RTGS time window will be modified as under with effect from December 29, 2014:

S. No.	Daily Events	Timing on Weekdays / Regular Days	Timing on Saturdays / Short Days
1.	Open for Business	08:00 hours	08:00 hours
2.	Initial Cut-off	16:30 hours	14:00 hours
3.	Final Cut-off	19:45 hours	15:00 hours
4.	IDL Reversal	19:45 hours – 20:00 hours	-
5.	End of Day	20:00 hours	15:30 hours

5. This circular is issued under Section 10 (2) of Payment & Settlement Systems Act, 2007.

6. Please acknowledge receipt.

Yours faithfully,

Vijay Chugh
Principal Chief General Manager

TAGS: RBI advances timing for RTGS business hours, rbi, RBI RTGS timing, RBI RTGS Timing Changes,

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RBI Circular on RIDF and other funds

RBI/2014-15/345
FIDD.CO.Plan.BC.46/04.09.59/2014-15

December 10, 2014

The Chairman/Managing Director/
Chief Executive Officer
(All Scheduled Commercial Banks excluding RRBs)

Dear Sir/Madam,

RIDF and other funds

Please refer to our Circular RPCD.CO.Plan.BC.66/04.09.54/2011-12 dated March 16, 2012 on the above subject. In this connection, it has been decided to restructure the classification of shortfall and interest payable to banks falling in these categories on deposits placed by them in the above funds, prospectively with immediate effect, as under:

Deposit Rates
S. No.	Shortfall in overall priority sector lending target	Revised Rates
1	Less than 5 percentage points	Bank Rate minus 2 percentage points
2	5 and above, but less than 10 percentage points	Bank Rate minus 3 percentage points
3	10 percentage points and above	Bank Rate minus 4 percentage points

2. Please acknowledge receipt.

Yours faithfully,

(A Udgata)
Principal Chief General Manager

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RBI asks banks to comply with address proof norms

In June 2014, RBI had said that customers will need to submit only one documentary proof of
address
The Reserve Bank of India (RBI) on Monday said banks should ensure that customers are not
unnecessarily asked to submit additional proofs of addresses for current addresses, in cases
where proofs of addresses for permanent addresses are already available.

In June 2014, RBI had said customers will need to submit only one documentary proof of
address (either permanent or current), while opening a bank account or while undergoing
periodic updation. Earlier, customers also had to submit a local address proof to the bank.

Despite this instruction, RBI said some banks are still insisting on submission of a proof of
address for the current address even when a customer produces a proof of permanent address.
This, said RBI, prevents many prospective customers, especially migrant workers, from opening
bank accounts.

RBI has asked banks to confirm latest by Friday that the instruction has been communicated to
all their branches and the same have been meticulously complied with.

(Business Standard)

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Public Provident Fund Scheme, 1968 and Senior Citizens Savings Scheme, 2004 - Revision of interest rates

RBI/2013-14/526
DGBA.CDD. No. 5342 /15.02.001/2013-14

March 21, 2014

The Chairman and Managing Director/Managing Director
Head Office, Government Accounts Department
State Bank of India/State Bank of Bikaner & Jaipur/
State Bank of Hyderabad/State Bank of Mysore/
State Bank of Patiala/ State Bank of Travancore/
Andhra Bank/Allahabad Bank/Bank of Baroda/Bank of India/
Bank of Maharashtra/Canara Bank/Central Bank of India/
Corporation Bank/Dena Bank/Indian Bank/ Indian Overseas Bank/
Oriental Bank of Commerce/Punjab National Bank/Punjab & Sind Bank/
Syndicate Bank/UCO Bank/Union Bank of India/United Bank of India/
Vijaya Bank/IDBI Bank Ltd./ICICI Bank Ltd.

Dear Sir/Madam,

Public Provident Fund Scheme, 1968 (PPF Scheme, 1968) and
Senior Citizens Savings Scheme, 2004 (SCSS, 2004) - Revision of interest rates

Please refer to our circular RBI/2011-12/359 dated January 20, 2012 regarding interest rates on small savings schemes, wherein it was indicated that as per Government’s decision on revision of interest on small savings schemes, the interest rates on various small savings schemes for every financial year will be notified by the Government before April 1st of that year.

The Government of India has now vide their Office Memorandum (OM) No. 6-1/2011-NS.II dated 4th March 2014, advised the rate of interest on various small savings schemes for the financial year 2014-15. Accordingly, the rates of interest on PPF, 1968 and SCSS, 2004 for the financial year 2014-15, effective from April 01, 2014, on the basis of the interest compounding/payment built-in in the schemes, will be as under:

Scheme	Rate of Interest w.e.f. 01.04.2013	Rate of Interest w.e.f. 01.04.2014
5 Year SCSS, 2004	9.2% p.a.	9.2% p.a.
PPF, 1968	8.7% p.a.	8.7% p.a.

The contents of this circular may be brought to the notice of the branches of your bank operating the PPF, 1968 and SCSS, 2004 schemes. These should also be displayed on the notice boards of your branches for information of the PPF, 1968 & SCSS, 2004 subscribers.

Yours faithfully

(Shrikant Hamine)
Manager

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RBI: Give customers a free copy of credit profile

MUMBAI: Customers should be given a free copy of their credit profile as it would help in promoting financial discipline among loan seekers, an RBI report says.

"The Committee has suggested that providing customers with a free copy of their Credit Information Reports (CIRs) would help create awareness about the need to have credit discipline, enable customers to correct their behaviour and improve their score well before they plan to avail fresh credit of any kind...," the report said.

The move would also help detect identity theft at an early stage, it added.

Report of the 'Committee to recommend Data Format for Furnishing of Credit Information to Credit Information Companies (CICs)' has been put up on RBI's website for comments.

The committee, which recently submitted its report to RBI, has made wide ranging recommendations on issues relating to credit information, such as, increasing its coverage, format of reports and best practices to be followed by credit institutions, credit information companies (CICs) and the RBI.

The panel, headed by Aditya Puri, Chairman of HDFC Bank, also recommended use of common data formats and a common data quality index that could assist credit institutions in determining the gaps in data.

Low usage of credit information by member institutions and other specified users needs to be addressed by requiring CICs to populate their databases with requisite credit information so that enquiries by specified users yield desired information, it added.

"This can be done by increasing the coverage of credit information in terms of membership and products and by creating awareness about Credit Information Reports (CIRs)," the report said.

The Credit Information Bureau (India) (CIBIL) was incorporated in 2000. Following enactment of the Credit Information Companies (Regulation) Act (CICRA) in 2005, three other Credit Information Companies (CICs) were also set up.

The report said that reducing the information asymmetry between lenders and borrowers, provides a fillip to the growth of credit especially among the disadvantaged sections of society.

The panel suggested that CICs should have a common classification of credit scores so they are easier to understand and interpret. It suggested that the CIBIL method of calibrating from 300 to 900 may be adopted by other CICs.

It further said banks and financial institutions may report cases of wilful default directly to the CICs.

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RBI extends the date for exchanging Pre-2005 banknotes to January 01, 2015

Following its Press Release of January 24, 2014, the Reserve Bank of India has extended the date for exchanging the pre-2005 banknotes to January 01, 2015. It has also advised banks to facilitate the exchange of these notes for full value and without causing any inconvenience whatsoever to the public. The Reserve Bank solicits the cooperation of the public in withdrawing these notes from circulation by exchanging them at a bank branch convenient to them.

This withdrawal exercise is in conformity with the standard international practice of not having multiple series of notes in circulation at the same time. A majority of such notes have already been withdrawn through the banks and only a limited number of notes remain with the public.

The Reserve Bank clarifies that the public can continue to freely use these notes for any transaction and can unhesitatingly receive these notes in payment, as all such notes continue to remain legal tender.

The Reserve Bank will continue to monitor and review the process so that the public is not inconvenienced in any manner.

Alpana Killawala
Principal Chief General Manager

Press Release : 2013-2014/1735

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Banknotes issued prior to 2005 to be withdrawn: RBI Advisory

The Reserve Bank of India has today 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. (Please see illustration below)

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.

Ajit Prasad
Assistant General Manager

Press Release : 2013-2014/1472

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Soon, you will have to pay for transactions at your bank’s own ‪ATM‬ too…

Banks seek to cap free ATM use at 5 times per month

MUMBAI: Account holders may end up paying the price of additional security at ATMs in the form of fewer free transactions. The Indian Banks Association (IBA) has proposed that the mandatory five free transactions that banks are required to allow in a month include even the ones at the ATMs of an account-holder's bank.

The proposal comes in the wake of higher charges that banks foresee as they have been directed to provide guards at every ATM and also have electronic surveillance in the form of CCTVs. The instructions have come from state governments in the wake of a brutal attack at an unguarded ATM kiosk in Bangalore last year.

IBA has also supported an increase in charges that banks pay each other when their customers use third-party ATMs from Rs 15 to Rs 18. At present, most banks do not charge account holders if they use the bank's own ATMs. In addition, RBI norms require every bank to allow its customers access to third-party ATMs five times a month without any charge, subject to a maximum withdrawal of Rs 10,000. Some banks provide their customers more than the mandated number of free transactions but this varies from bank to bank.

Addressing reporters, IBA chief executive M V Tanksale said that the increase will not affect most account holders since it allows more than one transaction per week. "For balance enquiry, SMS is a much more convenient option," said Tanksale, adding that reducing the number of free transactions would ensure there is no overutilization of the ATM network.

According to Tanksale, the ATM network of banks is currently around 1.4 lakh and is expected to increase to around 2 lakh in six months. "The viability of this network depends on the migration of transactions from branches to ATMs," said Tanksale. He added that given the size of the network, any increase in costs would translate into an annual increase in cost of thousands of crores.

With ATM networks seeing explosive growth, the RBI has been taking measures to ensure that all constituents are covered. The central bank has said that a percentage of all new installations should be disabled friendly. "IBA has designed a logo to highlight ATMs that are accessible to the visually challenged. This way the public can direct the visually challenged to ATMs that they can use," said Tanksale.

The other problem is that with the sudden spike in installations in the last one year, the average transactions has dropped sharply. With the government proposing to transfer subsidies and other benefits directly to individual accounts, banks are expecting a surge in transactions.

In the early days of shared payment network, banks charged anywhere between Rs 20 to Rs 60 for use of third-party ATMs. Four years ago, RBI directed banks to waive all charges, but later relented and allowed banks to charge beyond five transactions a month. (TOI)

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Banks to ensure that SMS alert charges are levied on all customers on actual usage basis

RBI/2013-14/381
DBOD. No. Dir. BC. 67/13.10.00/ 2013-14 November 26, 2013

All Scheduled Commercial Banks

(Excluding RRBs)

Dear Sir/ Madam

Charges Levied by Banks for Sending SMS Alerts

Please refer to paragraph 37 of the Second Quarter Review of Monetary Policy Statement 2013-14 announced on October 29, 2013 (extract enclosed) on ‘Customer Service- Charges Levied by Banks for Sending SMS Alerts’.

2. In this connection, a reference is also invited to our circular DBOD. No. Dir. BC. 56/ 13.03.00/ 2006-2007 dated February 2, 2007 on ‘Report of the Working Group to Formulate a Scheme for Ensuring Reasonableness of Bank Charges’ whereby banks were advised to identify basic banking services on the basis of broad parameters indicated by the Working Group constituted by Reserve Bank of India for the purpose and the principles to be adopted/ followed by them for ensuring reasonableness in fixing and communicating the service charges for the basic banking services.

3. Banks are required to put in place a system of online alerts for all types of transactions irrespective of the amounts involving usage of cards at various channels in terms of circular RBI/ DPSS No. 1501/ 02.14.003/ 2008-2009 dated February 18, 2009 and DPSS. CO. PD. 2224/ 02.14.003/ 2010-2011 dated March 29, 2011. Banks have accordingly put in place a system of SMS alerts so as to help customers in fraud mitigation and have been levying uniform service charges to various categories of customers.

4. Considering the technology available with banks and the telecom service providers, it should be possible for banks to charge customers based on actual usage of SMS alerts. Accordingly, with a view to ensuring reasonableness and equity in the charges levied by banks for sending SMS alerts to customers, banks are advised to leverage the technology available with them and the telecom service providers to ensure that such charges are levied on all customers on actual usage basis.
Yours faithfully,
(Rajesh Verma)
Chief General Manager

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Banks violate RBI norms to deny zero-balance A/Cs

MUMBAI: Banks have been found to use the Reserve Bank of India's norms as an excuse to avoid opening zero-balance accounts. In a sting operation conducted by a web portal, an IIT Mumbai professor sought to open a basic bank account in 19 banks without address or identity proof. In all the 19 branches, the professor was shooed away although RBI regulations require banks to open a 'small account' without address or identity proof.

The professor's sting operation seeks to expose how banks use the pretext of 'know your customer' guidelines to turn away business that is unprofitable. Incidentally, these are the same banks which fell victim to a sting operation by a web portal which exposed their willingness to violate the 'know your customer' guidelines to grab business. The professor's experience was that the underprivileged were chased away from bank branches by intimidating them, citing RBI norms and account opening requirements ranging from Rs 500 to Rs 3 lakh. The lenders included public, private and foreign banks.

The surprising part was that even when confronted with RBI regulations, nearly all front office staff were clueless. None were aware that RBI norms do indeed allow customers to open an account with zero balance requirement and ATM card facility merely on the basis of an application form, a photograph and a self-declaration.

Ashish Das from the department of mathematics at IIT Bombay conducted the survey across bank branches as part of a study, titled Banks Violating Prevention of Money-Laundering Act for Excluding the Excluded. The study has now been published by the department and also released in the form of a report.

The notification on the basic savings account facility was issued by RBI on August 2012. RBI norms on its website state that a basic account can be opened with simplified KYC norms. But if simplified norms are used, the account would be treated as a 'small account'. In other words, such accounts will be eligible for a maximum balance of Rs 50,000 and maximum withdrawals cannot exceed Rs 10,000 in a month. Also, these accounts cannot be used for receiving money from abroad. While the limits ensure that these accounts cannot be misused for money laundering, it provides individuals without address proof or identity cards the opportunity to maintain savings with banks and also use ATMs.

But rather than open these accounts, banks are instead pushing underprivileged customers to 'business correspondents', who charge for opening bank accounts. Das's report shows that majority of bank employees are unaware that RBI norms allow a small basic bank account on the basis of a mere application form and declaration that proof of address will be provided within a year.

Even at the head office level, the awareness of account opening requirements appear to be low. Six of the banks covered gave RBI norms as a reason not opening the basic accounts.

RBI has not made it any easier for banks to open small accounts. The requirement for banks to open a 'small account,' without address or identity proof, comes in a directive from the finance ministry notification dated December 16, 2010. The reference to the notification on simplified KYC norms is buried in an annexure to RBI on directions for opening small accounts.(TOI)

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Tata Sons withdraws Application for New Bank

The Reserve Bank of India has today communicated that Tata Sons Limited has withdrawn its application made on July 1, 2013 for a new bank licence. 

The company has indicated that its current financial services operating model best supports the needs of the Tata Group’s domestic and overseas strategy, and provides adequate operating flexibility to its companies, while securing the interests of the Group’s diverse stakeholder base. The Reserve Bank has accepted withdrawal of the application.

It may be recalled that the Reserve Bank of India had, on July 1, 2013 placed on its website a list of 26 applicants for new bank licences in the private sector and had intimated the change in the names of applications earlier on September 6, 2013.

The RBI has accepted the application withdrawal request, according to the statement. 

Tata Sons had filed the application on July 1, according to the RBI. Companies in the Tata Group include Tata Consultancy Services Ltd, Tata Motors Ltd, and Tata Steel BSE Ltd. 

RBI said in a press release that has accepted the withdrawal.

That leaves 25 applicants, including the Aditya Birla Group, the Bajaj Group and Anil Ambani’s Reliance Group, in the race for a banking licence.

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RBI outlines rules for foreign banks’ India operations

The RBI on Wednesday released the roadmap for foreign banks operating in India, with a focus on shifting them towards operating via a wholly owned subsidiary (WOS) model. Currently, all foreign banks in India are operating through the branch model.

While it is mandatory for foreign banks that have entered the country after August 2010 to convert to the subsidiary model, for banks that have been in the country since before August 2010, incentives are being provided to push them towards converting their branch operations into subsidiaries.

"They will be incentivised to convert into WOS because of the attractiveness of the near-national treatment afforded," the RBI said.

The branch expansion guidelines, as applicable to domestic scheduled commercial banks, would generally be applicable to WOS of foreign banks, except that they will require prior approval of RBI for opening branches at certain locations that are sensitive from the perspective of national security. An incentive in the form of a branch in a Tier-1 centre would be given for opening of a branch in Tier-2 to Tier-6 centres of districts of underbanked states, RBI said.

To prevent domination by foreign banks, restrictions would be placed on further entry of new WOS of foreign banks or capital infusion, when the capital and reserves of the WOS and foreign bank branches in India exceed 20% of the capital and reserves of the banking system.

Importantly, the RBI says that a WOS looking to enter into mergers and acquisition transactions with any private sector bank in India would be permitted, subject to regulatory approvals, to the overall foreign investment limit of 74%.

At a meeting in Washington last month, RBI governor Raghuram Rajan had indicated that foreign banks may be allowed to acquire smaller private banks to improve their reach and presence, The statement had led to a sharp rise in stock prices of banks like Karnataka Bank, Lakshmi Vilas Bank and Dhanalaxmi Bank, considered to be possible acquisition targets.(The Indian Express)

Tags: RBI outlines rules for foreign banks’ India operations

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Issue TDS certificates on time to customers: RBI to banks

Timely Issue of TDS Certificate to Customers

RBI/2013-14/361
DBOD.No.Leg.BC.65/09.07.005/2013-14

November 6, 2013

All Scheduled Commercial Banks
(excluding RRBs)

Dear Sir/Madam,

Timely Issue of TDS Certificate to Customers

It has been brought to our notice that, some banks are not providing TDS Certificate in Form 16A to their customers in time, causing inconvenience to customers in filing income-tax returns timely.

The matter has been examined and with a view to protect interest of the depositors and for rendering better customer service, banks are advised to provide to their customers from whose income tax has been deducted at source, TDS Certificate in Form 16A. Banks are advised to put in place systems that will enable them to provide Form 16A to the customers within the time-frame prescribed under the Income Tax Rules. 

Banks should avoid waiting till the last moment.

This advice is issued under Section 36 (1) (a) of the Banking Regulation Act, 1949 (10 of 1949).

Yours faithfully,

(Rajesh Verma)
Chief General Manager

Tags: rbi, Issue TDS certificates on time to customers: RBI to banks,

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rbi hikes repo rate by 0.25 percent to 7.75, CRR Unchanged

Inflation worries forced the Reserve Bank to continue its firm stance and hike the short-term lending (repo) rate by 0.25 per cent, a step that will make corporate and consumer loans more expensive.

There was no surprise in the first full policy unveiled by new RBI Governor Raghuram Rajan on Tuesday, who increased the repo rate, as was widely expected, by 0.25 per cent to 7.75 per cent and brought down the cost of short-term funds for banks by slashing the marginal standing facility (MSF) rate by a similar quantum to 8.75 per cent.

The policy stance and measures, Mr. Rajan said, “are intended to curb mounting inflationary pressures and manage inflation expectations in a situation of weak growth.

“These will help strengthen the environment for growth by fostering macroeconomic and financial stability. The Reserve Bank will closely monitor inflation risk while being mindful of the evolving growth dynamics,” he said.

The central bank reduced the growth forecast for the current fiscal to 5 per cent from 5.5 per cent projected earlier. Economic growth fell to a decade-low of 5 per cent in the previous financial year.

The RBI left other rates unchanged, such as the cash reserve ratio at 4 per cent, and mandatory holdings in government securities and other liquid assets as a solvency measure (SLR) at 23 per cent.

However, the Governor doubled the borrowing limit of banks against their cash positions or NDTL to 0.5 per cent for both 7-day and 14-day repos, with immediate to increase liquidity in the system.

Lowers growth forecast

The Reserve Bank on Tuesday scaled down the growth forecast for current fiscal to 5 per cent from the earlier projection of 5.5 per cent, citing downside risk stemming from domestic constraints.

” ... headwinds to growth from domestic constraints continue to pose downside risks, and vulnerabilities to sudden shifts in the external environment remain,” RBI Governor Raghuram Rajan said in the second quarter review of monetary policy.

The RBI had projected a growth of 5.5 per cent for 2013-14 in its first quarter monetary policy on July 30.

The economy grew by 4.4 per cent in the first (April-June) quarter of current fiscal. It had expanded by 5 per cent in 2012—13 fiscal, the lowest level in a decade.

“Strengthening export growth and signs of revival in some services, along with the expected pick-up in agriculture, could support an increase in growth in the second half of 2013-14 relative to the first half,” Mr. Rajan said.

He said the revival of large stalled projects and clearances by the Cabinet Committee on Investment (CCI) would buoy investment and overall economic activity towards the close of the year.

The RBI’s projections are in line with that of the World Bank and International Monetary Fund (IMF) which lowered the growth forecast for India earlier this month.

The World Bank slashed India’s economic growth forecast for the current financial year to 4.7 per cent from an earlier projection of 6.1 per cent. Besides, IMF projected an average growth rate of about 3.75 per cent for India in 2013-14.

Mr. Rajan said industrial activity has weakened with a contraction in consumer durables and capital goods sector, reflecting ongoing downturn in both consumption and investment demand.(The Hindu)

Keywords: RBI, quarterly review, RBI policy, repo rate hike

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ATMs of Banks: Fair Pricing and Enhanced Access – Draft Approach Paper

1. Automated Teller Machines (ATMs) have gained prominence as a delivery channel for banking transactions in India. Banks have been deploying ATMs to increase their reach. While ATMs facilitate a variety of banking transactions for customers, their main utility has been for cash withdrawal and balance enquiry. As at the end of October 2007, the number of ATMs deployed in India was 31,078. Commensurate with the branch network, larger banks have deployed more ATMs. Most banks prefer to deploy ATMs at locations where they have a large customer base or expect considerable use. To increase the usage of ATMs as a delivery channel, banks have also entered into bilateral or multilateral arrangements with other banks to have inter-bank ATM networks.

ATM Networks

2. The ATMs of a bank are connected to the accounting platform of the bank through ATM switch(es). Inter-bank ATM networks are created by setting up apex level switches to communicate between the ATM switches of different banks. The inter-bank ATM networks facilitate the use of ATM cards of one bank at the ATM(s) of other banks for basic services like cash withdrawal and balance enquiry. Banks owning the ATMs charge a fee for providing the ATM facility to the customers of other banks. This fee referred to as 'interchange fee' is recovered by the ATM deploying bank from the card issuing banks. However the interchange fee is not fixed across banks and depends on the terms of bilateral / multilateral arrangements. Banks with larger ATM network treat interchange fee as an important stream of revenue.

Inter-connectivity of ATM Networks for enhanced access

3. An apex level switch or inter-connectivity of ATM Networks provides access to the customers to use any ATM in the country irrespective of the bank with which the customer is banking. There are a number of ATM network switches such as CashTree, BANCS, Cashnet Mitr and National Financial Switch (NFS). In addition, most ATM switches are also linked to VISA or MasterCard gateways (for honouring Debit / Credit cards issued under VISA or MasterCard affiliation).

Charges levied by banks

4. Information collected from all public sector banks and a cross section of other banks indicates that they do not charge their customers that use their own ATMs for cash withdrawals and balance enquiry. It is reported that one bank is extending cash withdrawal and balance enquiry services free of charge to all customers, except the 'No Frills' account holders.

5. The charges range from 'Nil' to Rs.57/- per transaction when their customers use the ATMs of other banks for cash withdrawals and balance enquiry. The charges depend on the network relationship between the bank owning the ATM and the customer’s own bank.

Under bilateral arrangement

6. In case the customers use ATMs of the banks with which their bank has 'bilateral arrangement' (customers of one bank can use the ATMs of the other bank with which the customers bank has a ATM sharing arrangement), the charges levied by the banks on their customers vary from 'Nil' to Rs.50 per transaction for cash withdrawal and 'Nil' to Rs.20 for each balance enquiry.

Under shared ATM network (other than NFS)

7. The charges levied by banks which are members of shared ATM network (inter-connected ATMs of a group of banks) and provide access to other ATM networks (other than NFS), vary from 'Nil' to Rs.55 per transaction for cash withdrawal and the charges levied for each balance enquiry vary from 'Nil' to Rs.20.

Under shared ATM network - NFS

8. In respect of ATM networks of banks which are 'connected to NFS', the charges levied by the banks vary from 'Nil' to Rs.55 per transaction for cash withdrawal and 'Nil' to Rs.20 for each balance enquiry.

Under VISA / MasterCard network

9. In respect of ATMs which are 'directly connected' to VISA / MasterCard network, the charges levied vary from 'Nil' to Rs.57 per transaction for cash withdrawal and 'Nil' to Rs.20 for each balance enquiry.

Benefits of transparency

10. It is evident that the charges levied on the customers vary from bank to bank and also vary according to the ATM network that is used for the transaction. Consequently, a customer is not aware, before hand, of the charges that will be levied for a particular ATM transaction, while using an ATM of another bank. This generally discourages the customer from using the ATMs of other banks. It is, therefore, essential to ensure greater transparency.

International experience

11. International experience indicates that in countries such as UK, Germany and France, bank customers have access to all ATMs in the country, free of charge except when cash is withdrawn from white label ATMs or from ATMs managed by non-bank entities. There is also a move, internationally, to regulate the fee structure by the regulator from the public policy angle. The ideal situation is that a customer should be able to access any ATM installed in the country free of charge through an equitable cooperative initiative by banks. The process may be ensured, if necessary, by regulatory intervention by way of setting service charges considered reasonable.

Reasonableness of charges levied by banks

12. The component(s) for service charges may be as under:

(A) When customer uses his/her own bank ATM: It may relate to cost of ATM operation less cost of operation if the customer visits the branch for cash withdrawal or balance enquiry at the counter. This cost generally works out to be negative, as cost of servicing at counters is much higher than servicing through ATMs.

(B) When customer uses ATM of other banks: When a bank customer uses an ATM of a bank other than his/her own bank, it is reasonable that the service charge that the customer pays should reflect the interchange fee that his/her bank will pay to the ATM-owning bank and switching fee, if any.

13. The data collected from various banks indicates that, generally, the aggregate charges per transaction range from Rs.10 to Rs.20 for cash withdrawal and Rs.5 to Rs.8 for balance enquiry.

14. It is gathered that switching fee being levied by the switch providers like NFS, Mitr, Cashnet, VISA, Mastercard etc. varies from 'Nil' to Rs. 3 per transaction.

Recent Initiative

15. In order to reduce the cost of operations for banks, the Institute for Development and Research in Banking Technology (IDRBT), which is administering the National Financial Switch, has waived the switching fee that it was hitherto charging, with effect from 3rd December 2007. This reduction in the transaction cost is expected to be passed on to the customers by the banks.

Case for rationalisation

16. Use of technology should, among others, lead to reduction in transaction costs to banks. Over a period, with the increasing adaptation of the people to the use of technology in their daily transactions, it is expected that there will be a further reduction in the transaction costs. In these circumstances, the regulator, by authorising the establishment of an ATM, has a responsibility to ensure transparency and fair charges for the use of ATMs.

17. There is also a good case for establishing greater level of transparency in the context of adoption of technology to enhance the level of financial inclusion. In this background, there is also a case for rationalizing the service charges for ATM transactions such that it becomes affordable for the common man. Enhanced and cost effective access to ATMs plays an important role in technology based financial inclusion.

Suggested Approach

18. Taking into consideration the above, and in the public interest, the approach is to establish a fair and transparent framework for levy of service charges for ATMs such that it would encourage greater financial inclusion and promote enhanced access to ATMs. In this direction, banks may levy service charges suggested in the table below, on their customers, for access to ATMs.

Service	Proposed charges
For use of own ATMs for any purpose	Free
For use of other bank ATMs for balance enquiries	Free
For use of other bank ATMs for cash withdrawals	No bank shall increase the charges prevailing as on December 23, 2007 Banks which are charging more than Rs.20 per transaction shall reduce the charges to Rs.20 per transaction by March 31, 2008 Free - with effect from April 1, 2009.

http://www.rbi.org.in/Scripts/bs_viewcontent.aspx?Id=1102

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RBI Governor launches new ISO 20022 compliant RTGS System

Dr. Raghuram Rajan, Governor, Reserve Bank of India, today launched the new Real Time Gross Settlement (RTGS) system of the Reserve Bank of India. Complimenting the entire team for successfully completing the project, the Governor said, "The new RTGS system is a great example of what we are capable of when we put our minds to it." He added that payment system like plumbing has to be efficient and ahead of the financial markets to be able to take care of the future developments in the financial markets. With its advanced liquidity and queue management features, the new RTGS system is expected to significantly improve the efficiency of financial markets. He hoped the new RTGS system would be such a driver for India's financial system.

Reportedly the first in the world to be built on ISO 20022 messaging standards, the new RTGS system is highly scalable and will have several new functionalities. These include advance liquidity features, including gridlock resolution mechanism and hybrid settlement facility, facility to accept future value dated transactions, options to process multi-currency transactions, etc. These functionalities, as and when made available for use, will be notified to the participants.

The new ISO 20022 compliant RTGS system provides three access options to participants – thick-client, Web-API (through INFINET or any other approved network) and Payment Originator module. The participants can decide the mode of participation in the system based on the volume of transactions and the cost of setting up the infrastructure.

The Real Time Gross Settlement (RTGS) system is a large-value funds transfer system which banks use to settle interbank transfers for their own account as well as for their customers. It was first implemented in India in March 2004 as a major technology based electronic funds transfer system across the country. The system facilitates customer, inter-bank payment on a ‘real’ time and on gross basis. The system also facilitates settlement of Multilateral Net Settlement Batch (MNSB) files emanating from other ancillary payment systems.

The RTGS infrastructure is critical in facilitating the orderly settlement of payment obligations. The role of central banks as operators of large-value payment systems is important in the context of the broader role of the central bank in a nation’s financial system insofar as it offers “safety net” attributes by providing final settlement in central bank money.

RTGS is a critical Financial market Infrastructure (FMI) operated by the Reserve Bank of India and it will be assessed against the Committee on Payment and Settlement Systems and the International Organisation of Securities Commissions (CPSS-IOSCO) “Principles for Financial Market Infrastructures” applicable to FMIs.

With implementation of the new RTGS system, the existing RTGS system will cease to be operational. Further, the “RTGS System Regulations 2013” would replace the RTGS (Membership) Business Operating Guidelines, 2004 and RTGS (Membership) Regulations, 2004.

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