Consumer Issues
Legislative committee cannot debar bank's recovery process: HC

The Bombay High Court also held that the Bank was free to pursue the recovery proceedings against 16 farmers in accordance with law, irrespective of a letter issued by the Maharashtra Legislative Secretary or the minutes of the meeting of the Committee on Petitions

 
Mumbai: The Bombay High Court has held that the Committee on Petitions, constituted under Maharashtra Legislative Council rules, has no jurisdiction to interdict recovery process resorted to by banks against farmers, reports PTI.
 
The court was hearing a plea filed by Sangli-based Dr Annasaheb Choughle Urban Cooperative Bank seeking a direction to the Committee on Petitions to refrain from entertaining an application filed by Mohan Joshi, MLA, and representation of 16 agriculturalists, who had to repay loans taken by them.
 
Justice RY Ganoo and Justice Ajay Khanvilkar also held that the Bank was free to pursue the recovery proceedings against 16 farmers in accordance with law, irrespective of a letter issued by the Maharashtra Legislative Secretary or the minutes of the meeting of the Committee on Petitions.
 
The judges, however, made it clear that they are not expressing any opinion either way with regard to the correctness and legality of the agreement arrived at for and on behalf of the bank by the Chairman, Vice Chairman and Chief Executive Officer to modify the rate of interest payable by the farmers.
 
If that action is challenged in any proceedings, being illegal or prejudicial to the interests of investors, members or creditors of the Bank, it will have to be considered on its own merits, in accordance with the law, the judges opined while disposing of a petition filed by the bank.
 
The bank had urged the Court to direct the Committee on Petitions to refrain from entertaining the applications of the farmers and Joshi.
 
The alternative relief claimed was to direct Secretary of Maharashtra Vidhan Bhavan to place the Bank's representation before the Committee with a guideline that the same be heard and disposed of in a time-bound manner.
 
The Bank had advanced Rs90 lakh to 20 borrowers on 29 March 2004. It advanced another sum of Rs9 lakh to three other borrowers on 30 March 2007. That sum was given against the security of mortgage created by each of the 23 persons in the Bank's favour. In due course, however, the loan amount became hopelessly irregular and non performing assets (NPAs).
 
As a result, the bank processed the proposal of the 23 borrowers and found that 16 of them fell in the category of small/marginal farmers as defined in loan waiver scheme of the Government. 
 
As on 31 December 2007, the 16 agriculturalists were collectively eligible for loan waiver of Rs30.33 lakh. The bank, accordingly, gave credit of the corresponding amount in the respective accounts of these persons.
 
After the said adjustment, as on 31 March 2010, a sum of Rs28.52 lakh still remained due and payable by them to the bank collectively.
 
So far as the seven remaining persons, who were not small farmers, they were eligible for a partial waiver of 25% of the outstanding amount in their accounts as on 31 December 2007.
 
However, all the seven failed to deposit the necessary amount of Rs1.17 crore in order to become entitled for loan waiver.
 
Since the payment became over due, the Bank initiated proceedings under Section 101 of the Maharashtra Cooperative Societies Act, 1960.
 
The Registrar of Cooperative Societies, after hearing the Bank and the 23 defaulters, issued Recovery Certificates under Section 101 of the Act.
 
On the basis of these Certificates, the Bank resorted to execution of Recovery under Rule 107 of Maharashtra Cooperative Societies Rules.
 
According to the bank, these were judicial proceedings and steps taken by it to recover the outstanding dues, against all its borrowers, as per law. It argued that the borrowers could have resorted to remedy of revision application under Section 154 of the Act, against these proceedings. Instead, however, the farmers, approached Joshi, an MLA, on 24 July 2010.
 
He, in turn, requested the chairman of the Committee on Petitions to place the application made by the 16 farmers before the committee.
 
Accordingly, the matter proceeded before the Committee which considered the said application and ordered stay of recovery of defaulted amount from the 16 farmers until further orders to be passed by it.
 
The Principal Secretary, Department of Cooperation, Government of Maharashtra, was summoned by the Committee on Petitions, which met on 8 September 2010.
 
The Committee, upon considering the submissions made before it, including by the Bank, ordered that recovery of the defaulted loan deserved to be stayed.
 
Being aggrieved, the bank moved the High Court.
 

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Banks can undertake 'proprietary transactions' in bond market: RBI

The central bank has allowed scheduled commercial banks to become members of SEBI approved stock exchanges for undertaking proprietary transactions in the corporate bond market

 
Mumbai: The Reserve Bank of India (RBI) has said banks can become members of stock exchanges to undertake 'proprietary transactions' in the corporate bond market, reports PTI.
 
"In order to further enhance transparency, it has been decided to permit scheduled commercial banks (SCBs) to become members of Securities and Exchange Board of India (SEBI) approved stock exchanges for the purpose of undertaking proprietary transactions in the corporate bond market," the RBI said.
 
While India has a very advanced G-sec market, its corporate bond market is relatively underdeveloped.
 
Various stakeholders, including government, RBI, SEBI and Insurance Regulatory and Development Authority (IRDA) in the recent times have made co-ordinated efforts to help development of a more vibrant corporate bond market.
 
RBI Deputy Governor HR Khan recently said that while the measures taken so far have generated the momentum needed to develop the corporate bond market, the indicators are suggesting that the market is yet to develop to its potential in relation to needs of India's macroeconomy.
 
The size of the Indian corporate bond market at 11.8% of GDP is lower than the average for Emerging East Asia and for Japan at 17.2% and 19.8%, respectively.
 
Some of the initiatives taken by the RBI to develop the market include measures to impart liquidity by permitting repo transactions in corporate bonds and increase transparency by capturing information related to the trading, have been taken.
 
A well-developed corporate bond market provides additional avenues to corporates for raising funds in a cost effective manner and reduces reliance of corporates on bank finance.
 
Total issuance of corporate bond market increased to Rs2.96 lakh crore in 2011-12 from Rs1.74 lakh crore in 2008-09. Similarly, trade volume has increased to Rs5.93 lakh crore in 2011-12 from Rs1.48 lakh crore in 2008-09.
 

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RBI asks banks to migrate to IPv6 version of web protocol

The Indian government wants migration to IPv6 of all payment gateways, banks, financial institutions and insurance companies, including their websites should be completed by December 2012

 
Mumbai: The Reserve Bank of India (RBI) has asked the banks to migrate to the latest version of Internet Protocol IPv6 from IPv4, preferably by December 2012, reports PTI.
 
"Since migration to IPv6 is an eventuality that has to be accepted and managed proactively, government wants it to be done in a planned way rather than against time," RBI said in a notification.
 
Internet Protocol version 6 (IPv6) is the latest Internet Protocol (IP), the primary communications protocol upon which the entire Internet is built. It is intended to replace the older IPv4, which is still employed for the vast majority of Internet traffic as of 2012.
 
RBI further added that, “they (government) have expressed that the migration of all payment gateways, banks, financial institutions, insurance companies, etc. including their websites should be completed preferably by December 2012." 
 
It said banks may take necessary action by forming a special team to complete the migration within the stipulated time.
 
As per the National Telecom Policy 2012 (NTP-2012), Internet is envisaged as a catalyst for socio-economic development of the country and as an effective medium of various citizen-centric services.
 
"Since the current version of Internet Protocol (IPv4) has almost run out of addresses, the broadband revolution is sure to ride on next generation Internet Protocol (IPv6).
 
The NTP-2012 recognises the futuristic role of IPv6 and aims to achieve substantial transition to IPv6 in the country, RBI added further.
 

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