Economy
G20 to launch major investment initiatives in countries like India
According to the Brisbane Action plan released as part of the G20 communique, growth in some key emerging market economies is robust and is becoming more sustainable, including in China and India
 
The G20 has cited India among other countries for the launch of major investment initiatives and for having a sustainable growth.
 
A Brisbane Action plan released as part of the G20 communique also said that the state of the global economy calls for a comprehensive and coherent policy response that restores near-term demand, removes medium-term supply constraints and builds consumer and business confidence.
 
“While growth in some key emerging market economies is robust and is becoming more sustainable, including in China and India, it is slowing in some other countries,” it said, adding that many low-income countries are performing well.”
 
Railways Minister Suresh Prabhu, who was Prime Minister Narendra Modi’s Sherpa at the summit of the group of 20 industrialised and emerging market economies, told reporters that India’s expected growth is projected to be over 6% in 2014-15.
 
India’s economic growth accelerated to 5.7% in April-June quarter against 4.7% in the same quarter of previous fiscal. The economy grew by sub-5% in 2012-13 and 2013-14.
 
The G20 noted that growth has picked up in some advanced economies, notably the US, the UK and Canada. However, the recovery is modest in Japan and in the euro area and inflation is well below target.
 
“The global economy remains vulnerable to shocks, financial fragility remains and existing risks are exacerbated by geopolitical tensions,” the action plan said.
 
“We continue to monitor the near-term and long-term effects of the global financial crisis. Economies are grappling with slower potential growth reflecting weaker investment, slower productivity growth, higher unemployment and lower labour force participation,” it said.
 
The action plan said that the implementation of policies to comprehensively address both near-term and medium-term challenges could further strengthen the recovery by building confidence and increasing demand.
 
Noting that the state of the global economy calls for a comprehensive and coherent policy response that restores near-term demand, removes medium-term supply constraints and builds consumer and business confidence, the plan said that the grouping has developed comprehensive growth strategies that address these challenges.

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FII stake hits all-time high of 27% in Sensex 30 stocks

Financials continue to remain the highest overweight sector for FIIs, while software and energy are the biggest underweight sector, says BofA-ML

 

Maintaining a bullish stance on Indian equities, foreign investors have increased their exposure in Sensex companies to an all-time high of 27% during the September 2014 quarter.

 

According to a report from Bank of America Merrill Lynch, strong inflows from foreign institutional investors (FIIs) over the past five years have resulted in all-time high foreign ownership for the Indian markets.

 

“FII stake in Sensex companies has been rising continuously since 2009,” the global financial services major said in a research note, adding the FII stake stood at an all-time peak of 27% as of 30th September.

 

FIIs continued to invest in India in the September quarter albeit at a slower pace. Moreover, this was the eighth consecutive quarter of positive inflows from FIIs.

 

As of June 2014, FIIs collectively held around 22.5% of the market and around 46% of the free float. In comparison, FIIs held around 15% of the total market cap and 36% of free float in March 2009.

 

A sector-wise analysis shows that financials continue to remain the highest overweight sector for FIIs, while software and energy are the biggest underweight sectors.

 

“We are positive on energy sector reforms and believe positive progress on it could lead to FII buying in PSU oil companies,” the report added.

 

Most bought sectors by FIIs were consumer, telecom, software and financials. On the other hand, most sold sectors by FIIs were industrials, cement and metals.

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Personal Finance Exclusive
‘Any Branch Banking' - For whose benefit?

While the banks have considerably benefitted from the introduction of CBS, the customers of banks have yet to reap the benefits

 

The biggest metamorphosis in the banking industry during the last decade has been the introduction of ‘any branch banking’ through the implementation of ‘core banking solution’ (CBS) across the country. Prof. Ashish Das of IIT, Mumbai in his report of October 2014  has analysed the discriminatory treatment meted out to bank customers in respect of service charges levied while availing service from different branches of the same bank since the introduction of CBS by the commercial banks in our country. He has rightly suggested regulatory actions on several fronts to bring in a meaningful, reasonable and logical rationale to eliminate any home / non-home (branch) discrimination of customers and thus protect millions of small and medium depositors.


In fact, this subject requires much deeper study, more so in the context of the aggressive campaign of the central government to bring into the fold a large number of people mainly from the rural areas that are outside the ambit of banking. Banks in India went in for total computerization in late nineties of the last century as it became physically impossible for them to service growing business transactions through manual operations.

 

Even the cost of servicing through large number of employees was not only prohibitive but also fraught with several operational risks. In addition, the new technology called ‘CBS’ came handy for banks to bring down their cost of operations, though in the process, helped banks’ customers as well to get the benefit of technology in their banking operations.  


What is core banking solution (CBS) and how does it help bank customers?

CBS is a technology platform used in networking of branches of banks, which enables customers to have access to their account through multiple delivery points, including different branches of the same bank, through ATMs, internet, and mobile phones etc., irrespective of the branch of the bank where the account was originally opened and maintained. CBS, inter-alia, is a step towards making banking services available to the customer anywhere and anytime through day and night.


One of the public sector banks has enumerated in its website the following benefits to its customers of CBS branches:     


“All CBS branches are inter-connected with each other. Therefore, Customers of one CBS branch can avail various banking facilities from any other CBS branch located any where in the world. These services are:               

     
a. To make enquiries about the balance; debit or credit entries in the account.       

b. To obtain cash payment out of his account by tendering a cheque.                             

c. To deposit a cheque for credit into his account.                                                                           

d. To deposit cash into the account.        

e. To deposit cheques / cash into account of some other person who has account in a CBS branch.                                                                                                                                                             

f. To get statement of account.                                                                                                                  

g. To instantly transfer funds from his account to some other account – his own or of third party, provided both accounts are in CBS branches.                                                                             

h. To obtain Demand Drafts or Banker’s Cheques from any branch on CBS – amount shall be online debited to his account.       

                                                                                                

i. Customers can continue to use ATMs and other Delivery Channels, which are interfaced with CBS platform. Similarly, facilities like Bill Payment etc. shall also be available.


“A CBS branch is like a Service Delivery Centre. Back office processes are handled through technology at some other site, called Data Center. Branches, therefore, have more time for serving customers. This improves the quality and efficiency of the services rendered and the customer is directly benefited by way of satisfying and happy banking experience. However, to safeguard the interest of customers, Bank has placed certain restrictions on the amount of transactions, which are handled through other branches under CBS.”  


How banks have benefitted from introducing the core banking solution -CBS?


With the introduction of CBS, the cost of servicing customers went down considerably for banks, besides helping them to improve their capability to service a large number of accounts with minimum cost as evidenced by the following facts and figures.

Table: 1- Growth of business of all scheduled commercial banks (SCBs) and their employee position for fifteen years from 1983 to 1998 (before introduction of CBS)

                    
Table: 2 - Growth of business of all scheduled commercial banks (SCBs) and their employee position for fifteen years from 1998 to 2013 (after introduction of CBS)


                                                                               
The pros and cons of Core Banking Solution


As stated in the tables above, while the business of banks grew exponentially, the number of employees went up marginally, thereby saving them huge manpower expenses with attendant benefits of lower capital cost on infrastructure. The banks, however, needed to invest on hardware and software on a regular basis, but this was much less compared to the total savings in work force cost on a continuous basis year after year.


On the other hand, customer service started deteriorating slowly, and the biggest casualty of CBS is the personal relationship between banker and customer. For every hiccup in service quality, banks started blaming computers and expressed helplessness in servicing customers across the counters. Here are a few examples of how customers are being treated today under the CBS environment:


1. Recently a senior citizen went to a public sector bank to renew his fixed deposit for a further period of five years. Even after waiting for an hour, he could not get his renewed deposit receipt, as the printer was not working due to a technical snag. The depositor was asked to come the next day to collect the renewed deposit receipt, which he did with all the inconveniences and added cost of travel.


2. In another instance, a savings depositor asked for more information on a credit entry as the passbook contained only a reference number without any details. The clerk declined to give any more information about the credit, for want of details in the computer. When the customer shouted at the counter clerk for not complying with his request, the branch manager came and pacified the account holder, who was later provided with all the information that was available at the branch, but the clerk had not taken the trouble to enter full details while making the entry in the first instance.          

                                                  
3. It is common experience in many banks that you do not get your passbook written up instantly because of the problems either with the computers or with the printers. Many a time, customers are asked to come the next day just to update their passbooks.  


4. A senior citizen depositor found to his dismay that the bank continued to deduct tax on the interest credited on his fixed deposit -FD though he had submitted Form 15H in time to the branch. When he sought refund of tax so deducted, he was asked to get the refund from the Income Tax department by filing the return of income, when he had no taxable income. The bank simply put the blame on the computers for deducting the tax, and said they had no authority to refund the tax, as it was already remitted to government.


5. The most deplorable aspect of tax deducted at source (TDS) came to light when a bank continued to deduct tax on behalf of a deceased depositor, who was a joint depositor with his wife, though his name was deleted from the deposit receipt at the request of the survivor. The bank subsequently informed the surviving depositor that their computer software does not provide for deletion of the first depositor’s name and hence deduction of TDS under his name was done automatically by the computer. The spouse was asked to file the tax return in the name of her deceased husband and get refund of tax wrongly deducted by the bank.


The travails of bank depositors are never ending and these are only illustrative and not exhaustive instances of problems encountered by customers, who silently put up with these inconveniences, despite banks proclaiming that they provide world class banking service. It does not mean that there were no mistakes committed before the introduction of CBS, but all those mistakes were corrected then and there to the satisfaction of customers.                                

                                                                                 
What are the directions of RBI with regard to inter-sol (inter-branch) charges?


Do customers really get all the benefits listed above from a branch other than the home branch where the account is opened and maintained? Banks did make available most of these services but at a cost to the customers. Banks used to levy different charges for different services, if availed at a non-home branch till the Reserve Bank of India (RBI) issued guidelines in this regard. On 1 July 2013, RBI issued a circular to all banks directing them as under:     


“In order to ensure that bank customers are treated fairly and reasonably without any  discrimination and in a transparent manner at all branches of banks/service delivery locations under CBS environment, banks are advised to follow a uniform, fair and transparent pricing policy and not discriminate between their customers at home branch and non-home branches. Accordingly, if a particular service is provided free at home branch the same should be available free at non-home branches also. There should be no discrimination as regards intersol charges between similar transactions done by customers at home branch and those done at non-home branches.”      

                                                          
The RBI has given total freedom to banks to levy charges subject to such charges being fair, reasonable and made available without any discrimination and in a transparent manner at all branches. Who decides that the charges are fair and reasonable? Each bank may consider what they charge is fair and reasonable, while the customers of each bank may feel otherwise. Will the RBI sit on judgment over who is right and who is wrong?


The biggest loop-hole in these directions of RBI is that banks are only asked not to discriminate between similar transactions done at home and those done at non-home branches. This gives complete leeway for banks to start levying a charge for transactions done at home branch, (which is so far free) to enable them to levy the same charge at non-home branches also. The RBI directive, therefore, works against the interest of bank customers who will not only lose the existing facility of free transactions at their home branch, but also will have to pay at non-home branches.   


No doubt, technology is necessary to speed up the process of banking operations and provide seamless delivery channels to meet the growing needs of bank customers.  It should serve as a tool for improving customer service and make banking a delightful experience to the common people of this country. But unfortunately, neither the banking regulator nor the Indian Banks’ Association (IBA) has so far ventured to find out how far the technological developments in banking have served the needs of customers. Nobody wants to know whether they have stood the test of meeting the aspirations of millions of bank customers who are already in the banking fold and those who are being willy-nilly asked to open bank accounts in the name of Prime Minister’s Jan Dhan Yojana.


In short, while the banks have considerably benefitted from the introduction of CBS, the customers have yet to reap the benefits. This is because banks have not taken steps to ensure that technology does not replace the human interaction, which is essential for a service industry like banking, more so in our country, where a large majority of our people are neither financially literate nor tech-savvy to understand the intricacies of dealing with a modern bank of our times. Besides, banks for reasons of their own, have not thought it fit to pass on the benefits of technology to customers by reducing bank charges and other levies, which are continuously on the rise, causing considerable hardships to the common people of our country. And as if to add insult to injury, RBI has permitted banks to restrict the free usage of ATMs which will directly hit the common man, for whose benefit banks were first nationalized in 1969.

 

(The author is a banking analyst and he writes for Moneylife under a pen name ‘Gurpur’)

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COMMENTS

vswami

3 years ago

OFFHAND
Q
5. The most deplorable aspect of tax deducted at source (TDS) came to light when a bank continued to deduct tax on behalf of a deceased depositor, ...The spouse was asked to file the tax return in the name of her deceased husband and get refund of tax wrongly deducted by the bank.
UQ

This aspect has been oversimplified; and misconceived That is NOT the way the CPC of the Tax Dept. Is pre set to work and any longer process tax returns and refund claims Study and consider the full implications of SEC 200A of IT Act.

The problem is in the widely /repeatedly complained of 'mismatch' of income with TDS as displayed in 26AS. Solution is not so formidable, as impudently made out to be; the bank computer system requires to be revamped and tuned afresh, so as to bring it in line with the change in tax law provisions on TDS and the new CPC procedure.

In fact, almost all banks, not being guided in the normal course or caring to take and act under proper advice by competent internal or external advice, on matters having tax implications, and on a timely basis, the patently continued wrong practices /deficiencies in the computerized system put the customers, having tax liability or otherwise, in perpetuated misery and hardships in procedural matters.

Experts or otherwise at large on the job, in-house or external, who are duty bound to render proper advice to employer/clientele (banks and customers), should keep abreast of/ remain vigilantly updated, and duly equipped, which should go a long way in avoiding / obviating such undesirable consequences being meted out, in their own interests, and not in the least, of the employer /clientele.



Devendra Swaroop Saksena

3 years ago

DS SAKSENA B-5, Tower 7,

New Moti Bagh,

NEW-DELHI 110023

14 December 2014



The Editor,

Moneylife



Sir,

Kindly refer to ‘Any Branch Banking' - For whose benefit? (Moneylife, 17 November). Banks in Delhi are declining payment of even “Self or Bearer” cheques at non-home branches, if sent through a messenger on the ground that such cheques are “third party cheques.”

My query is whether such refusal is justified under RBI guidelines?

Regards,

Sincerely,

DS SAKSENA


REPLY

MDT

In Reply to Devendra Swaroop Saksena 3 years ago

Dear Sir,
Thanks for your comment.
Request you to send in your query through our Free Credit Helpline http://www.freecredithelp.in/.
Best Regards,
MDT

AUROTTAM KUNDU

3 years ago

One more question : Is it necessary to update my passbook? I did it last in January,2014.But I do check my balance daily online.Once I asked the Single window op,is it necessary to update passbook? He said,no need.Secondly,I would like to ask why does SBI charge the beneficiary account of the funds transfered via Green channel from any other account of the SBI itself? Funniest part,they dont charge for internet fund transfer within SBI.So i had to stop using green channel.The bank official was pretty clueless as to why this was happening.No wonder I don't like visiting banks and do everything online.And my passbook stays un-updated for 10 months at a stretch.

AUROTTAM KUNDU

3 years ago

May I add that RBI order dated May 15,2014 Order no. RBI/2013-14/592 UBD.BPD.Cir.No.62/13.03.000/2013-14 clearly instructs all banks for not deducting any penalty charges for non maintenance of minimum balance.Since I was sure that nothing will happen if my balance goes beyond that limit,I withdrew the money only to find that at the end of the month they deducted 393.57 INR.A bit of haggling with the manager yielded no results,so had to use the threat weapon,told them will tarnish them on facebook,in my friend circle,in office,in neighbourhood and they refunded the amount within one day.I hear people losing money like this day in and day out.Mailed the banking ombudsman kolkata to take necessary steps,yet to hear from them.The bank tells that they were awaiting clear operational guidelines from RBI regarding the non-levy of charges for less balance in account.What an excuse!! I got away since this was a private bank.had it been sarkari,I would have been done for.

AUROTTAM KUNDU

3 years ago

May I add that RBI order dated May 15,2014 Order no. RBI/2013-14/592 UBD.BPD.Cir.No.62/13.03.000/2013-14 clearly instructs all banks for not deducting any penalty charges for non maintenance of minimum balance.Since I was sure that nothing will happen if my balance goes beyond that limit,I withdrew the money only to find that at the end of the month they deducted 393.57 INR.A bit of haggling with the manager yielded no results,so had to use the threat weapon,told them will tarnish them on facebook,in my friend circle,in office,in neighbourhood and they refunded the amount within one day.I hear people losing money like this day in and day out.Mailed the banking ombudsman kolkata to take necessary steps,yet to hear from them.The bank tells that they were awaiting clear operational guidelines from RBI regarding the non-levy of charges for less balance in account.What an excuse!! I got away since this was a private bank.had it been sarkari,I would have been done for.

vswami

3 years ago

The Banking Sector Regulator, the RBI, as is known, as a result of widespread protests from the borrowing public, albeit under exerted public pressure, eventually agreed to do away with so called penal charge on foreclosure of 'home loans'. Nonetheless, such a charge, so also adjustment and recovery of excess on interest account, on premature withdrawal of 'term deposits' likewise being objected to for long, has not been acceded to; particularly even in cases, in which as per the applicable terms and conditions, as agreed at the time of opening and acceptance of term deposits, no such readjustment and recovery out of already accrued interest, or an additional penal charge had been stipulated. In one's conviction, such an ongoing practice suffers from faulty logic, and is patently tantamount to a fraud foisted on the gullible banking customers. Others are invited to share their own information and personal experience, for the common benefit of one and all.

jaideep shirali

3 years ago

The ridiculousness in CBS implementation is seen from the Single Window counters in banks. One window caters to pass books, one for demand drafts, one for deposits, one for withdrawawals and so on. So where is the single window banking which CBS permits? And yet we will continue to monitor the small depositor with an eagle eye, while crores worth of big loans are never monitored leading to massive NPAs. So much for computerization.

p s deekshitulu

3 years ago

It is true that the business of the Banks has increased multifold during the past decade. Apart from the traditional business, Banks have started many ancillary services like Life / Non-life insurance, Mutual funds etc. Though there are separate workforce available at the top level, but at the ground level only the existing staff has to take care of the new business. Drastic reduction in the staff strength at ground level and increased business have led to the present situation. Added to this, the Banks have invested huge amounts for technology up gradation and neglected to train the staff to adopt themselves to the changing environment in the industry. As a result, the benefits of CBS are not reaching the customers. However, some visible change is observed among the staff. Still there is much scope for improvement. Banks have to concentrate on this and initiate required steps.

REPLY

Gurudutt Mundkur

In Reply to p s deekshitulu 3 years ago

Mr Deekshitulu is right. By taking on anciliary businesses and not providing dedicated lower level staff for the same, [for it would be costly to do so] core banking services are not fully provided except where the number of customers is low.

Ravindra

3 years ago

Is it possible to have ANY BANK BANKING??? If ANY BANK ATM is possible and working satisfactorily, why not ANY BANK BANKING????

Gurudutt Mundkur

3 years ago

The solution is simple ... there is no dearth of banks and branches, especially in the larger cities. Talk to people and find a bank branch which by common consent provides the best services. Open an account there. One should not be sentimental when it comes to taking care of one's assets.

Shashibhushan Gokhale

3 years ago

Banks are making a joke of Core Banking.

SBI non-home customers in Pune can avail non-home service only in three branches located in three corners of the city. All other branches simply decline non-home transactions and customers have to travel 5-10 kms to reach such a branch. One theory I heard for this is that service from employees in some branches is worst due to which all customers flock to good service branch thus overloading the good people and management does nothing to discipline the bad ones.

Almost all other banks have different policies, which I feel are designed to maximize profit for banks. One of which is that there is a small cash withdrawal as well as deposit limit on non-home branches beyond which you are charged per thousand rupees. He is YOUR customer after all. What are extra expenses for a bank if he approaches another branch of the same bank? I just could not imagine any reason for this other than to maximize bank profits.

PREMNATH N KINI

3 years ago

A very well written article.

The biggest problem is that banks make arbitrary rules which even RBI is not aware of.
A SBI Branch had the first half an hour only for "NON HOME BRANCH'transactions.
This was justified saying that the volume of the transactions otherwise would take all the branch time.

I also observe that at the Andheri west branch of SBI tokens are issued even for cash Depositing.
After waiting for 45 minutes & making a noise as the no. was not being called at all the person at the counter informed me that ATM card holders should not be depositing money at the Counter but only use the ATM for deposits also.
The branch explanation is that the staff has been reduced considering ATM usage.
Has RBI approved of this as when ATM cards were issued this was not informed?

REPLY

Ravindra

In Reply to PREMNATH N KINI 3 years ago

SBI is the most regressive Bank and still people open accounts with SBI. Naturally they face the outcome.

Gurudutt Mundkur

3 years ago

Fair & uniform? Well not exactly.
Cheques deposited through clearing are done as routing without an charge, though manual activity is involved at various points.
But banks [except one] levies a charge for a NEFT, EVEN THOUGH NOT HUMAN INTERVENTION IS REQUIRED. In fact nobody in the Bank even knows about the transfer until someone opens the account page!

Amritraj Peshin

3 years ago

Traditionally banks do not see us as customers they see us as depositors or borrowers both of which entities are reqd to be grateful for the respective service provided, a public sector hangover.

while this has changed in many ways vestiges remain in organizational structures, decision making processes & invisible political interference.

Demanding transparency through organized consumer action is the only way

Ramesh Patwardhan

3 years ago

Quite an interesting article!

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