As part of the strategy to infuse liquidity in the system, the RBI Thursday bought bonds worth Rs8,109.48 crore under open market operations, much lower than the Rs12,000 crore target
Mumbai: As part of the strategy to infuse liquidity in the system, the Reserve Bank of India (RBI) Thursday bought bonds worth Rs8,109.48 crore under open market operations (OMO), much lower than the Rs12,000 crore target, reports PTI.
Four securities were on offer for OMO but the RBI subscribed only to two, the central bank said in a statement.
While the government security (G-Sec) maturing 2018, with a coupon rate of 7.83%, garnered over Rs5,234.89 crore, the 7.80% G-Sec maturing on 2021 garnered Rs2,874.58 crore.
The central bank has infused over Rs33,100 crore in four tranches in the last one month. While it bought bonds worth Rs9,435.48 crore on 24th November, it infused Rs5,782.95 crore on 1st December this year.
On 8th December, it bought bonds worth further Rs9,092.9 crore, followed Rs8,790 crore on 22nd December.
OMOs are the “first preference” of RBI while injecting liquidity and there is an opportunity to raise up to Rs2.74 lakh crore through the window.
RBI deputy governor Subir Gokarn had last month said that liquidity is likely to be under pressure for some more time on account of such as advance tax payments.
Overnight drawings by banks from RBI’s liquidity adjustment facility have exceeded Rs1,20,000 crore and it has said in the past that deficit has exceeded its targeted 1% of net demand and time liabilities (NDTL).
Most of the mutual funds launched in the course of the year 2011 have outperformed their benchmark.
NFOs (new fund offers) haven’t brought in much into equity this year. But, out of the nine equity linked schemes where the benchmark performance was available, seven were able to outperform their benchmarks. The year (January 2011 to December 2011*) saw just 10 equity-linked NFOs being launched with a total inflow of Rs612 crore whereas the previous year saw 23 NFOs being launched bringing in Rs4,659 crore. Out of the recent NFOs, Tata Retirement Savings Fund-Moderate Plan and Tata Retirement Savings Fund-Progressive Plan, could pull in just Rs10 crore of investment. Whereas the last two NFOs prior to this—Peerless Equity Fund and Edelweiss Select Midcap Fund—pulled in Rs24 crore, and Rs6 crore, respectively. A rather poor performance compared to Union KBC Equity Fund which got Rs167 crore of investments in June 2011, one of the highest inflow for the year.
The performance of Union KBC Equity fund just about matched that of its benchmark, whereas the other funds have managed to perform slightly better than their benchmarks. There were two mid-cap funds as well which were able to beat the benchmarks—Axis Midcap Fund and Edelweiss Select Midcap Fund.
As far as liquid and monthly income plans (MIPs) go, all of them launched this year have outperformed their benchmarks. The were three liquid funds—Union KBC Liquid Fund, Morgan Stanley Liquid Fund and Indiabulls Liquid Fund and five MIPs—ICICI Prudential MIP 5, IDBI MIP, Kotak Multi Asset Allocation Fund, L&T MIP Wealth Builder Fund and Pramerica Dynamic Monthly Income Fund.
There were four income funds, as well—Axis Dynamic Bond Fund, Pramerica Credit Opportunities Fund, Taurus Dynamic Income Fund, Templeton India Corporate Bond Opportunities Fund. Out of these, Pramerica fell short of its benchmark—giving a return just 0.03 percentage points lower than its benchmark with 1.94%.
We had 32 capital protection funds launched by nine fund houses. Out of the 30 funds where returns were available, 20 outperformed their benchmark. Most of the outperformers came from Axis MF, Birla Sun Life MF, Canara Robeco MF, SBI MF, Sundaram Mutual and Tata MF. Four funds each from ICICI MF and Sundaram MF underperformed their benchmarks.
Branch managers find it easy to forward customer grievances to the nodal officer instead of addressing it at their level due to stiff internal auditing procedures. This is how a grievance becomes complaint, says Ashok Rawat, Hon Secretary of the All-India Bank Depositors' Association (Mumbai). Mr Rawat was one of the members of the Damodaran Committee appointed by the RBI to look into customer services in banks
Moneylife (ML): The 2006 Banking ombudsman scheme that was there in 2002 has now been replaced. Has the new scheme been effectively placed?
Ashok Rawat (AR): To some extent it has. It has widened the scheme of the compliance and it also gives an opportunity to the aggrieved bank customer to make an appeal to the deputy governor of the Reserve Bank of India (RBI). Thus, making an appeal to the deputy governor on the Ombudsman’s order is a positive step taken. The scheme is now comparatively cheaper than the earlier and is not as costly as the schemes that are there in other sectors.
One drawback is that majority of the Ombudsmen appointed are former bank officials. So there is a suspicion on to whether they would act neutrally. But at the same time, since banking is a special financial business, outsiders may not know the intricacies involved and the grievance a customer can have due to deficiency in the services. Bank officers, even retired-ones, are aware about such issues. In addition, since they are retired, there are fewer chances for them being biased toward banks.
It is important to note that the appellate body on the Ombudsman’s order is the deputy governor. This therefore balances the function of the Ombudsman.
Ombudsmen in some states like Madhya Pradesh are playing a very positive role. They are actively involved in spreading awareness among the rural people, interacting with them and learning about their difficulties, which otherwise the banks are expected to do.
ML: Did the Damodaran Committee have any recommendations for the Ombudsman’s office?
AR: Yes, the Damodaran Committee suggested having an internal Ombudsman. So if the recommendations of the committee are accepted, which are under the consideration of the RBI, there could be an internal Ombudsman at the bank level. Here the bank would have a choice of having an Ombudsman either from the bank or from outside. The neutrality factor of the Ombudsman (if from the bank) can be raised, but here again the appellate body would be the external Ombudsman office. Hence if too many appeals are made to the Ombudsman, then the concerned bank can be questioned. I personally feel that the deputy governor would still remain as final appellate body. Thus, until the scheme is not implemented we cannot comment on how it would perform.
ML: You were also member of the Damodaran Committee. Did you have an opportunity to check the effectiveness of the working of these committees?
AR: There may be some genuine mistakes which a bank manager is willing to correct. At this level it is not really a complaint, it is just a grievance which may occur because of the mass scale operations in the banking sector. But if the bank manager does not correct it, it becomes a complaint and goes to the nodal officer. If the nodal officer, too, fails to act upon then it becomes a dispute and goes to the Ombudsman.
So the banks’ policy should be ‘no complaints’. If this is implemented, then many of the grievances would be resolved at the bank manager level itself. Therefore, the board of directors (BoD) of the bank should take a decision to this effect. This would drastically reduce number of complaints going to nodal officer and above. It would also give some quality time to the nodal officer as well as to Ombudsman to address remaining complaints that reach them.
ML: Banks often go on increasing service charges. Is it something to worry for the customer? What is the stand of the banking association on this?
AR: We first need to understand why these charges are imposed. In 1998, when the banking sector was liberalised, it was said that the banks would have freedom to levy charges for any service. Then came the Banking Codes and Standard Board of India (BCSBI), a self regulatory body for bankers. And the banks needed to disclose change in charges in advance to the body and to the customers.
So for each service the banks give and levy, charges are known much in advance. If a bank is technology-oriented and has less staff, it may charge less to a customer who does banking without interacting with its staff and vice versa. In short, bankers who provide more services and others who provide only the basic services would altogether have different structure of charges.
If a particular service is costing some amount, the customer should pay that much. Unfortunately costing of services is not done today. In 2005-2006 there was a working group on Reasonableness of Bank Services. It recommended that the BoD should look into the costing of the services and ensure that the charges are reasonable. This recommendation was accepted by the RBI and was communicated to banks through guidelines. That was before 4-5 years ago.
Today nobody does that costing. So even in nationalised banks the charges are levied by comparing with what the State Bank of India (SBI) is charging. This is not at all advisable.
Since these charges are informed in advance there should not be many complaints. It should be noted that banks, which claim to provide a basket of services and fail to do so, also compensates for it. This should be one of the criteria a customer should take into consideration before choosing a bank.
ML: Are you satisfied with the working of the RBI Ombudsman? Do you recommend any changes?
AR: Yes, I think there is a need to…
a) widen the scope of functioning,
b) the BoD of banks should create awareness among its customers and a policy decision should be made to resolve the grievances at the branch office itself,
c) today for a customer it is very difficult to choose a bank on two grounds—one he is not aware of the costing and two only the RBI knows how secure a bank is. The customers do not know whether their savings are safe or not. So this secrecy needs to questioned,
d) the media should give more publicity on steps that an aggrieved customer should take before going to the Ombudsman. We have noticed that on many occasions, the nodal officer at the bank plays a very responsible role. This is because he knows that if too many complaints reach to the Ombudsman, the bank may be questioned.
However, what is deterrent and what has not come out even in the Damodaran Committee report is that there are internal auditors in each bank wherein some banks say that if there is some compensation given to the customer, the branch manager will have to justify it. The justification is because if the branch manager compensates the customer, it would reduce the bank’s profit. This is a deterrent for branch managers while dealing with grievances.
In such cases, the branch managers find it easy to forward complaints to the nodal officer instead of addressing it at their level. This is how a grievance becomes a complaint. So it is recommended that the branch manager should be given the responsibility to deal with it at the branch level itself.