RBI deputy governor KC Chakrabarty says banks misguiding investors on bad loans
MUMBAI: Reserve Bank deputy governor K C Chakrabarty today flayed banks for attributing their sudden fall in profits to the computerised system of recognising bad loans and said this is tantamount to misguiding investors.
"You have misguided your investors for the past five years by not giving your proper NPA (non-performing assets) figures," he told a banking technology summit organised by the industry body CII here.
The senior-most deputy governor who oversees the banking services at the monetary authority, also wondered as to how an inanimate object like the "system" can generate NPAs and said the markets regulator Sebi should look into this issue.
"Should not the (markets) regulator (Sebi), who is dealing with listing, should take action against the banks?" he asked.
Wondering how even after computerisation, banks are unable to identify NPAs, Chakrabarty said, "so long as system- generated NPAs were not there, was the computer giving wrong figures?"
The deputy governor's comments come in light of a slew of banks, especially the state-run ones like Central Bank of India and Union Bank of India, among others, reporting massive dent in their profits and attributing the same to migration to the system-generated approach of identifying bad loans, over the last fiscal.
"I do not want to negate what he (Chakrabarty) said. But it is not that on a very big scale the bankers have all of a sudden come out with this situation," Central Bank Chairman and Managing Director M V Tanksale told reporters when sought for his comments on the sidelines of the same event.
Tanksale also explained that his bank, which ended the last quarter in the red due to higher NPAs and restructuring due to (power) distribution companies' exposure, showed a spurt in NPAs because the other banks got two to three years to migrate while his bank got only nine months.
Union Bank's newly appointed Chairman and Managing Director D Sarkar conceded that in the manual system of NPA recognition, some liberty was taken during external or internal audits, while the new system-based approach takes a very methodological view on the same.
Interest rates can’t drop as long as inflation is high: Chakrabarty
Jun 28 2012 , Mumbai
The interest rates are set to remain high as long as the returns to small savers are negative and inflation is high, said KC Chakrabarty, deputy governor of the Reserve Bank of India (RBI), while addressing the industry at a seminar in Mumbai.
“With the consumer price index at 10.5 per cent, there is no room for interest rates to fall. As long as the CPI is high, interest rates will stay high. We cannot have a system where our savers get negative returns,” he said.
Interest cost, he reiterated, is a small component of the total cost of companies. “When industry makes a case for interest rate reduction, they are representing the needs of a minuscule part of the population, and not representing the case of the public at large.”
Speaking at the CII Banking Technology Summit, Chakrabarty also said that banks would have to limit the liability on customers in case of a failed or fraud transaction. “And the onus of proving it lies with the bank. In case of a fraud, the liability on the customer should be minimum because it is not the fault of the customer that the technology of the bank has failed.”
Pradip Chaudhuri, CMD, State Bank of India (SBI), told reporters at the sidelines of the event that they are continuously working towards “customer centricity” and also trying to bring down costs of banking products.
RBI is of the view that all banks need to be customer-oriented and not let small retail customers cross-subsidise the large borrowers. “Transaction cost for large borrowers have come down, but it is still high for the small retail investors borrowers. Standardised procedures and practices must be followed by banks while implementing technology, so that the customer is comfortable to use the banking infrastructure,” Chakrabarty highlighted.
Banks in India do not have an ecosystem to support technological innovations. “Even the ATMs in the country do not have a standardised procedure. Probably, only 2 per cent of the total ATM transactions are failed transactions, but even this should not happen. Technology should be foolproof and standardised,” he added.
Chakrabarty recently got a two-year extension as deputy governor of RBI in-charge of customer relations and banking supervision. The prepayment penalty on loans was abolished under his persuasion for fair and better practices among banks.
http://wrd.mydigitalfc.com/personal-finance/interest-rates-can%E2%80%99t-drop-long-inflation-high-chakrabarty-034
“With the consumer price index at 10.5 per cent, there is no room for interest rates to fall. As long as the CPI is high, interest rates will stay high. We cannot have a system where our savers get negative returns,” he said.
Interest cost, he reiterated, is a small component of the total cost of companies. “When industry makes a case for interest rate reduction, they are representing the needs of a minuscule part of the population, and not representing the case of the public at large.”
Speaking at the CII Banking Technology Summit, Chakrabarty also said that banks would have to limit the liability on customers in case of a failed or fraud transaction. “And the onus of proving it lies with the bank. In case of a fraud, the liability on the customer should be minimum because it is not the fault of the customer that the technology of the bank has failed.”
Pradip Chaudhuri, CMD, State Bank of India (SBI), told reporters at the sidelines of the event that they are continuously working towards “customer centricity” and also trying to bring down costs of banking products.
RBI is of the view that all banks need to be customer-oriented and not let small retail customers cross-subsidise the large borrowers. “Transaction cost for large borrowers have come down, but it is still high for the small retail investors borrowers. Standardised procedures and practices must be followed by banks while implementing technology, so that the customer is comfortable to use the banking infrastructure,” Chakrabarty highlighted.
Banks in India do not have an ecosystem to support technological innovations. “Even the ATMs in the country do not have a standardised procedure. Probably, only 2 per cent of the total ATM transactions are failed transactions, but even this should not happen. Technology should be foolproof and standardised,” he added.
Chakrabarty recently got a two-year extension as deputy governor of RBI in-charge of customer relations and banking supervision. The prepayment penalty on loans was abolished under his persuasion for fair and better practices among banks.
http://wrd.mydigitalfc.com/personal-finance/interest-rates-can%E2%80%99t-drop-long-inflation-high-chakrabarty-034
Investing in gold is a peril for India, investors: RBI to public
Reserve Bank deputy governor KC Chakrabarty today said that educating common man about the speculative nature of gold investments is the key to bring down the high import of gold which is straining current account and pulling down the rupee.
"What will bring down gold imports is creating awareness in the society that gold is not a proper investment for the poor. It is a speculative investment. We need to change our culture," he told reporters on the sidelines of a CII-organized banking technology meet here.
He, however, did not give a direct answer when asked about reports that the RBI was contemplating a ban on the sale of gold coins by banks. When asked if such a move will bring down gold imports, he said, "I don't think so."
Gold, seen by many as a safe haven for parking money given the present gloom in the financial markets, is being sought-after by all, thereby putting stress on the current account deficit and the value of the rupee as bulk of the demand for the metal is met through imports.
Gold imports stood at 969 tonne worth USD 61.5 billion in FY12, according to the World Gold Council.
According to reports, the RBI is planning a reversal of its earlier stance taken when the rupee was relatively firm and may ban sale of gold coins by banks to arrest fall in the value of the currency (6 percent since January and 30 percent since last August) to keep a tab over the current account deficit, which is likely to touch four percent of GDP in FY12.
1 comment:
It is not correct to blame the technical snags about system generated NPAs. The software is designed to identify NPAs based on various parameters fixed for calling an account NPA. Banks have spent hundreds of crores for the software they are using. If the spurt in NPAs are due to defects in the software, then the top managements of the banks should fix accountability on the officials who have cleared using such defective software for NPA identification. Let the truth come out.
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