Money & Banking
RBI keeps monetary policy rates unchanged
The Reserve Bank of India (RBI), in its third bi-monthly credit policy review on Tuesday for FY2016-17 has kept the policy rates unchanged. The repo rate will remain at 6.50% while the reverse repo rate under the liquidity adjustment facility (LAF) will also remain at 6%. The marginal standing facility (MSF) rate and the bank rate also remain static at 7.0%. 
 
In a statement, RBI Governor Dr Raghuram Rajan said, "Risks to the inflation target of 5% for March 2017 continue to be on the upside. Furthermore, while the direct statistical effect of house rent allowances under the 7th Central Pay Commission (CPC)’s award may be looked through, its impact on inflation expectations will have to be carefully monitored so as to pre-empt a generalisation of inflation pressures. In terms of immediate outcomes, much will depend on the benign effects of the monsoon on food prices. In view of this configuration of risks, it is appropriate for the Reserve Bank to keep the policy repo rate unchanged at this juncture, while awaiting space for policy action. The stance of monetary policy remains accommodative and will continue to emphasise the adequate provision of liquidity. Easy liquidity conditions are already prompting banks to modestly transmit past policy rate cuts through their marginal cost of funds based lending rate (MCLRs) and pro-active liquidity management should facilitate more pass-through."
 
Here are the latest policy rates following RBI review… 
 
 
"The recent sharper-than-anticipated increase in food prices has pushed up the projected trajectory of inflation over the rest of the year. Moreover, prices of pulses and cereals are rising and services inflation remains somewhat sticky. There are early indications, however, that prices of vegetables are edging down. Going forward, the strong improvement in sowing, on the back of the monsoon’s steady progress, along with supply management measures, augurs well for the food inflation outlook. The prospects for inflation excluding food and fuel are more uncertain; if the current softness in crude prices proves to be transient and as the output gap continues to close, inflation excluding food and fuel may likely trend upwards and counterbalance the benefit of the expected easing of food inflation. In addition, the full implementation of the recommendations of the 7th CPC on allowances will affect the magnitude of the direct effect of house rents on the CPI. On balance, inflation projections as given in the June bi-monthly statement, i.e. of a central trajectory towards 5 per cent by March 2017 with risks tilted to the upside, are retained," Dr Rajan, who is stepping down next month, said in his last monetary policy statement.
 
 
Commenting on the policy review, Arundhati Bhattacharya, Chairman of State Bank of India (SBI) said, "The RBI decision to maintain status-quo was as per market expectations. The decision to frontload liquidity provisions through an announcement of open market option (OMO) is a well thought out move as capital flows have been relatively slow this year given the global uncertainties, resulting in lower net foreign exchange acquisition. We believe transmission of rates will happen gradually over the next few months as credit growth picks up pace".
 
Looking ahead, the RBI says, the momentum of growth is expected to be quickened by the normal monsoon raising agricultural growth and rural demand, as well as by the stimulus to consumption spending that can be expected from the disbursement of pay, pension and arrears following the implementation of the 7th CPC’s award. The passage of the goods and services tax (GST) Bill augurs well for the growing political consensus for economic reforms. 
 
"While timely implementation of GST will be challenging, there is no doubt that it should raise returns to investment across much of the economy, even while strengthening government finances over the medium-term. This should boost business sentiment and eventually investment," the central bank added.
 
RBI feels the current accommodative stance of monetary policy and comfortable liquidity conditions should also provide a congenial environment for the reinvigoration of aggregate demand conditions. However, successive downgrades of global growth projections by multilateral agencies and the continuing sluggishness in world trade points to further slackening of external demand going forward. Accordingly, RBI retained the gross value added (GVA) growth projection for 2016-17 at 7.6%, with risks facing the economy at this juncture evenly balanced around it. 
 

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COMMENTS

MG Warrier

4 months ago

When Reserve Bank of India came out with the last Monetary Policy Statement during the current tenure of Dr Raghuram Rajan’s governorship, it was great fun watching media and even most of the analysts searching for Dr Rajan’s ‘last words’. They didn’t find any of them. The document did not look different in presentation and content from the previous ones during the last three years. There was a difference, which went unnoticed.
Dr Rajan effectively put into use the management lessons he picked up from IIMA and his international experience in monetary management, supplemented by the expertise in teaching what he learnt, from day one at Mint Road, with plans to remain active as Governor till September 4, 2016. His reference during his post-policy interaction with media on August 9 to the slew of measures affecting the financial sector to be announced on August 25, 2016 is proof enough to show that the coming weeks are not going to be spent in late night farewell parties by him or his colleagues in RBI.
The challenge Dr Rajan has thrown out to RBI by leading from the front is daunting. He has demystified the central bank’s functioning and has changed the way in which the institutional system in the financial sector in India was functioning. The sector was playing a subservient role for which scripts were being written by corporate and political leadership, with implicit support from the babus in the North Block. RBI will definitely rise to the occasion and move forward.
M G Warrier, Mumbai

Gopalakrishnan T V

4 months ago

Very safe and right approach. No cut or hike in the rates and silenced all critics of RBI Governor. Inflation Risk is very high and the expectation that this will be at 5% by March 2017 is something hard to believe. Maintaining inflation at reasonable rate cannot be the full responsibility of RBI and the rate cut by RBI cannot ensure industrial growth as interest rate contribution to growth is insignificant. The monsoon seems to have favoured and this can have a smoothening effect on inflation but the pay hike of seventh pay commission and other transportation and distribution constraints observed in the supply chain can definitely add to the inflation. However, the present approach off RBI is very appropriate .

Money Muling: a tool to launder illicit funds
Criminals employ various methods to disguise the identity of their ill-gotten money. One method is to recruit ‘Money Mules’ to achieve their nefarious purpose. This essentially means conning people into lending their identity and bank account to route and transfer illegitimate money. Using people to transfer drugs or money has been a long-standing practice of the criminals. It is now on the rise and is being replicated in a high-tech crime environment. 
 
SS Mundra, Deputy Governor of the Reserve Bank of India (RBI) in a recent speech mentioned that JanDhan accounts are vulnerable to being recruited as money mules. However, the problem is not limited to India. There is a consistent rise in money muling since 2012 and even Singapore, which ranks among the strictest and least corrupt countries in the world, has admitted to rising incidence of money muling. 
 
Many people may unwittingly become money mules. Allow me to explain how this works. 
 
A ‘money mule’ is someone who is recruited by criminals to launder funds fraudulently obtained funds. The term, "mule” actually comes from the narcotics trade. Here, an individual is paid a fee to transport illicit drugs. Such an individual is known as a drugs Mule. A money mule is slightly different in that there is no physical transportation of money it is through the mule’s bank accounts. 
 
 If ‘money makes the world go round (from Cabaret, the musical) then money mules are the vehicle used by economic criminals to make it happen.  They are a necessary link for criminals but usually unrelated to the criminal activity that generate illicit funds. Their only utility is to transfer, and disguise the origins of illegal proceeds of crime by routing transactions through the bank accounts of mules.
 
How it operates
Money mules are usually people who are desperately looking for employment. Money mules can consciously choose to act as intermediaries with a view to earning money easily, but they are often unaware that they are being used. Criminals dupe innocent victims into laundering money by pretending to offer legitimate jobs via newspapers, chatrooms, job websites or ‘work-at-home advertisements’. They target vulnerable groups such as migrant workers or university students, who are tempted to earn some extra cash for receiving money from a victim’s account and transferring it to the criminal using a payment service. Sometimes, the money is transferred through multiple accounts and even countries to hide the trail. The mule is paid an attractive commission for the use of the account. Things get more dangerous when people are used to transfer funds for terrorist activity.
 
How customers should protect themselves
The websites of most banks have detailed warnings and guidlines for customers to follow so as not to get trapped as a money mule. Unfortunately, most people do not read. 
 
Here are a few dos and don’ts to avoid these traps. 
1. Do not  respond to emails asking for bank account details.
2. Verify any company offering you a job and check if the phone number, email address and website are correct. Remember, some mules clone the websites or legitimate companies. 
3. Be especially wary of job offers from people or companies that are overseas 
4. Beware of a company asking you to carry out international financial transactions for them through your bank account.
5. Do not get carried away by attractive commissions for
consent to receive unauthorised money.
6. Infrom the bank if you notice any unauthorised transaction in your account
7. Be very cautious of unsolicited offers or opportunities to make easy money. Remember the saying…If something looks too good to be true, then it probably is not true. 
8. Advertisements written in poor English with grammatical errors and spelling mistakes are usually a giveaway. Watch out for these. 
9. Be careful of companies seeking ‘representatives’ or ‘agents’ to act on their behalf for a period of time, sometimes to avoid high transaction charges or local taxes.
10. Never give your bank account details to anyone, unless you know
and trust them.
 
Risks in being used as money mule
  • A criminal could be posing as an employer
  • Acting as a mule is illegal and ignorance is no defence. 
  • “Money laundering consists of the conversion or TRANSFER of property …or of ASSISTING any person who is involved in the commission of the crime…”Money mule will be taken as a party to money laundering, as the money being   transferred is stolen, and this is called money laundering, which is illegal. Involvement in money laundering is a criminal offence and will lead to imprisonment.
 
Consequences, when these money mules are caught
  • Their bank accounts get suspended/ frozen, causing inconvenience,
  • Potential financial loss, 
  • Likely a long-term impact on credit scores. 
  • Likely legal action for being part of a fraud, long litigation and even imprisonment if you are unable to prove innocence.

     
(SSA Zaidi is a retired banker and consultant for training and development. He is also author of Anti Money Laundering /Anti-Terrorism Financing & Know Your Customer)

User

COMMENTS

Ramesh Poapt

4 months ago

Too good! It is difficult to escape a trap indeed!!

Aadhaar mystery: How many 'residents' actually have the UID number?
The Unique Identification Authority of India (UIDAI) claims that it has issued 103 crore Aadhaar numbers to Indian residents and almost 97% of them are adults. On the other hand, Ujjivan Financial Services, one of the most prominent names in microfinance segment, says just 77% of its customers have Aadhaar as on 15 July 2016. This is interesting. Because, Aadhaar came into existence under the garb of providing identification to those poor people who do not have any kind of ID. Since Ujjivan operates in microfinance segment, most of its customers are supposed to have the Aadhaar numbers if we consider the claims from UIDAI. But that is not the case.
 
 
 
 
We would presume that 100% of Ujjivan’s customers should have Aadhaar. They are borrowers who need to clear know your customer (KYC) norms. And all finance companies and banks have been waxing eloquent how Aadhaar has made life so easy for them. So, how come as high as 23% Ujjivan customers do not have the Aadhaar? Or is it possible that the claims by UIDAI are overhyped? 
 
Quite possible. Especially, if one were to look at the history of UIDAI and how it goofs up with numbers and figures. For example, UIDAI conducted a proof of the concept trial of the Aadhaar project between March and June 2010 neglecting the basic principle of pilot testing and size of sample. For over 120 crore UID numbers, they have used data from just 20,000 people, in pairs, as the sample and have on the basis of these results, went ahead with the UID number through the 'Aadhaar' project. 
 
On the false positive identification rate (FPIR), the authority had said, "We will look at the point where the FPIR (i.e. the possibility that a person is mistaken to be a different person) is 0.0025%". This means, for every 1 lakh comparisons, there would be two and a half false positives. On a large scale, it means for a population of over 120 crore, there would be 18 lakh crore false positives! (Read: How UIDAI goofed up pilot test results to press forward with UID scheme)
 
Coming back to Aadhaar, last week united opposition members disrupted proceedings in the Rajya Sabha, while protesting against making the UID number mandatory for availing government benefits like subsidised LPG, PDS supplies and pensions. Ram Gopal Yadav from the Samajwadi Party (SP) said the Centre has issued instructions to state governments to stop ration card benefits, pensions and subsidised LPG to those not having Aadhaar. As much as 40% of the population do not have an Aadhaar card and the move will hit the poor hard, he said (emphasis added). 
 
Dilip Tirkey of the Biju Janata Dal (BJD) told the upper house that 20% of the population in Odisha do not have Aadhaar number and the instruction from the Centre will only create problems for the poor (emphasis added).
 
The biggest shocker came from Petroleum Minister Dharmendra Pradhan, who said that 85% of the population have got Aadhaar, and the penetration can be pushed only with the effort of the state government. The question is how many citizens have actually received an Aadhaar number? It is 96.7% as claimed by UIDAI, or 85% as stated by the Minister? Or much lower, as charged by the Parliamentarians?
 
As if the white elephant of Aadhaar was not enough, the claims and counter claims are making it a story of an elephant and four blind persons with everyone giving their own numbers.  
 
Meanwhile, the Comptroller and Auditor General of India (CAG), in a report tabled in the Parliament on 2 August 2016, had said that UIDAI had granted undue favour to Wipro Ltd in a maintenance contract worth Rs4.92 crore. "The UIDAI, in contravention of the provisions of the contract, extended undue favour to the vendor (Wipro) and incurred an avoidable expenditure of Rs4.92 crore on annual maintenance contract of the equipment for a period covered under warranty/free maintenance," the CAG report stated.
 
"The UIDAI did not route its advertisements through the Directorate of Advertising and Visual Publicity in accordance with the advertisement policy of the Ministry of Information and Broadcasting. This led to loss of Rs1.41 crore as the eligible discount was not availed," the report added.
 
Wipro, however, has disagreed with the findings of CAG. "We disagree with the findings of the (CAG) report that UIDAI extended undue favour to us. We draw attention to the latter's response in the report that the acceptance of goods was given by the competent authority in UIDAI after commissioning the equipment," the software company said in a statement.
 
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COMMENTS

Sukanya Rao

4 months ago

In order to get a voters card I recall spending a full six hours waiting in the queue and much to my dismay I didn't receive the card. This happened about 25 years ago. Considering the importance of a voters card, I went again and waited for 12 hours in the queue. The waiting time would have been 8 hours had their machinery not broken down. Beyond the bad photo which looks like a compressed version of my face, my address is incorrect. Apart from voting I hadn't used it for any purpose. So when I read that the Supreme Court said that Aadhar card is purely voluntary I was happy and decided that I could live without one. But my happiness is short lived because I am slowly realizing that it is actually mandatory. My gas agency has called me this time third year in a row (apart from innumerable reminders) to submit my aadhar card and I don't have one. I have stopped receiving my gas subsidy despite my submitting the voters card. I am worried that I may stop receiving the gas cylinder itself. The Karnataka Education department has made it mandatory for all school children to have an aadhar card. I am receiving reminders since last year to submit my son's aadhar card from his school because the education department insists that all children must have one. I have heard rumours that without aadhar card, children may not be allowed admission into schools and colleges or they may not be able to receive their scholastic results. All this has got me worried and I decided to apply for an aadhar card finally. The government is arm twisting citizens to get an aadhar card despite the Supreme Court's ruling. I have also heard cases where the biometric machines were unable to read people's fingerprints and hence the aadhar card hasn't been useful. I am unable to understand the purpose an aadhar card will serve which is beyond a voters card, pan card, Passport, ration card, and various other cards that we have for ID proof and Address proof. I am sure a few years from now, we'll have to go through another card process.

Prakash Basrur

4 months ago

Are we not under the scanner of thousands of "on-line" media since last decade ? Google, WhatsApp , FaceBook et al have been snooping on our "Kundalis" 24/7/365 for many years ! Who has stopped those "Orwellian Big Bros" till now ? Are we going to stop using the Internet and Computers all together because of this threat ? Aadhar is another such "Ghost" we have to take it or leave it ! "Jai Ho !"

Prakash Basrur

4 months ago

Are we not under the scanner of thousands of "on-line" media since last decade ? Google, WhatsApp , FaceBook et al have been snooping on our "Kundalis" 24/7/365 for many years ! Who has stopped those "Orwellian Big Bros" till now ? Are we going to stop using the Internet and Computers all together because of this threat ? Aadhar is another such "Ghost" we have to take it or leave it ! "Jai Ho !"

Ralph Rau

4 months ago

UID is a dangerous concept which places the citizen at risk of continuous surveillance and encourages authoritarianism. George Orwell's Big Brother come true.

This is the reason citizens of developed nations have steadfastly opposed a similar biometric or Universal ID scheme.

Use of UID must be limited to subsidies for the poor especially since Rajee Gandhi acknowledged that 85% of welfare spending never reaches the recipient.

Nitin Bhatia

4 months ago

At least get your own numbers right before writing such a rant filled and poorly researched article.
" the possibility that a person is mistaken to be a different person) is 0.0025%". This means, for every 1 lakh comparisons, there would be two and a half false positives. On a large scale, it means for a population of over 120 crore, there would be 18 lakh crore false positives!"

Correct figure should be 30000 which is minuscule compared to the overall population.

NARENDRA NEGANDHI

4 months ago

even in writing an article of this size you make a blunder mentioning a figure of 18 lakh crore, you expect that such a huge tasks of UIDAI is to be done without mistake? AAdhar has to be made compoulsory & even if with an accuracy level of say 95% it will help india in a huge way. Let us all support rather than finding trivias about it

Anil Kumar

4 months ago

With such a big project, the overlaps / gaps is only logical. In due course, I think the juggernaut of enrollment will cover most of the most.

Hemant Chitale

4 months ago

It is for Residents. Don't use the word "Citizens" in your article. Going by advertisements on the Internet, Non-Residents also have been obtaining Aadhaar numbers.

ANIL KHEMKA

4 months ago

I HAD APPLIED 5 AADHAR FOR MY FAMILY.
HAVE RECEIVED ONLY 2 TILL DATE WITH NO COMMUNICATION ON THE FATE OF THE OTHERS SINCE 3 YEARS WHEN THE BIOMETRICS WERE TAKEN

P L Despande pawar

4 months ago

This is criticism for the sake of criticism.CAG's observation of undue benefit to Wipro is prima facie ridiculous.
May be there are slippages but you can't overlook the execution of milestone !

P L Despande pawar

4 months ago

This is criticism for the sake of criticism.CAG's observation of undue benefit to Wipro is prima facie ridiculous.
May be there are slippages but you can't overlook the execution of milestone !

SuchindranathAiyerS

4 months ago

When it comes to Statistics, the BJP is just as much a liar as the Khangress. Primarily because, like Aadhar, all the BJP policies are the same as that of the Sonia-Manmohan led Parivar that loots together to stay together. More importantly, it is the same rusted iron framework of incompetent, corrupt, Babu-Cop-Milard-Crony Kleptocrats comprising, for the most part, of those Constitutionally Certified to be Congenitally Backward.

REPLY

R Varadarajan

In Reply to SuchindranathAiyerS 4 months ago

How right you are !!! Everybody is on publicity drive !!!

MOHAN SIROYA

4 months ago

What is stated in the article appears to be true. The efficacy of linking ADHAAR no. to all other Bank or Income Tax KYC/Returns is not coming thru'. After hair splitting investigation as to the denial of
Aadhaar no. to other Govt. departments/KYC, especially with Income tax department is being ejected simply for the reason that ,While the PAN has Self name , Father name and also father an and not Husband name in case of a married woman. Aadhaar was not created on these parameters but only on self name followed by Fathers name separately. Because of this separation, Income tax
department is rejecting the linkage .



If it was necessary that we should register the name exactly as per PAN details, why the UIDAI authorities accepted name of the registrant without having Father's name in the middle of his name as per PAN card. In fact Pan Card was submitted as a prof of ID to make the Aadhaar Card.
Surpisingly till today, while maie Aadhar Card they did not inist on name exactly as given in PAN Card. Even a driving licence is accepted as proof of name and address, which again is different than given in PAN card. All such discrepancies make a mockery of efficacy of this linkage Tamaasha

REPLY

R Varadarajan

In Reply to MOHAN SIROYA 4 months ago

The major issue is that the persons who are involved with the ground level operations are not totally involved - for reasons best known to them and to their employers. This created endless problems for the residents and the correction of details become even more difficult.

M Muralidharan

4 months ago

There are many who have AADHAR and dont want to register the same in any bank or other Govt. places for their own ideas. Hence, the nos. registered with the Govt. Depts. can never be the correct one as not everyone would have used it in many places or all places as required.

Balraj Amaravadi

4 months ago

Now, got a communication to update AADHAAR number with EPFO which is a mandatory KYC!!!

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