NCDRC in its order told banks to pay for delay in cheque clearance

The National Consumer Disputes Redressal Commission (NCDRC) in its July 14 judgment has asked banks to credit local cheques to accountholders account the same day or at the most the next day. The commission in its order said the outstation cheques should be encashed between seven and 14 days, depending upon the distance from the place where the cheque is issued.

The commission in its order said you can claim interest from a bank for delayed encashment of your outstation cheques. “If there is any delay in collection of the said (outstation) cheques beyond the period… interest at fixed deposit rate, or at a specified rate as per the respective policy of the banks, is to be paid to the payee of the cheques.”

The judgment has come on the petition filed by an advocate Atul Nanda. As per the order of the commission the banks will have to pay interest to customers for delayed encashment of local cheques as well. Usually it takes up to three days to be encashed. While Nanda in his consumer litigation has said the delay in crediting the cheques to the consumers’ account was leading to “undue enrichment” of banks, which were earning crores in interest on the customers’ money for the delayed period.

The commission chairman Justice M. B. Shah directed the banks to abide by the order within two weeks. He asked the banks to write in bold letters in every branch’s notice board the salient features of their policies on collection period of outstation cheques and interest payable in case of delay. Justice Shah has asked the RBI to monitor the order.

Uttaranchal Gramin Bank to open three branches exclusively for women

Soon Uttaranchal Gramin Bank will be opening three branches exclusively for women in the hill state of Uttarakhand. The first such branch has already started operation at Dehradun’s Indira Nagar locality and being fully managed by women only.

In this branch only women are allowed to open their accounts. This is the 121st branch of the bank. There is a proposal of opening of three more such branches in Pauri and Pithoragarh districts.

A special women centre has also been opened at the head office of the bank. This centre has been started with the help from NABARD. The main drive of the women branch will be to attract Self-Help Groups (SHGs) and Non-Government Organizations (NGOs), having mostly women representatives.

"By opening women branches, we want to salute the women of the hill state who are known as matrishakti' (mothers' power) in Uttarakhand," said Chairman of the Uttaranchal Gramin Bank Threesh Kapoor.

In 2006 Uttaranchal Gramin Bank was formed with the merger of Alaknanda Bank, Ganga-Yamuna Bank and Pithoragarh bank. The bank has made a profit of Rs 8.83 crore before tax this year. This year bank has registered a jump of 233 per cent as compared to the last year.

The exceptional rise in the profit is mainly because of the merger of three banks. The bank is also promoting local artists from the state for this it has set up an art gallery at its head office.

IndusInd Bank offers attractive interest rates at 10 per cent per annum

IndusInd Bank Ltd, a new-generation private-sector bank in India, is offering 400 days attractive fixed deposit rates at 10 per cent per annum from July 2008. Bank in a statement said "We are feeling happy to announce the competitive fixed deposits rates in the industry once again. Bank has also started 200 days fixed deposits rate at 8.75% per annum."

Currently bank has around 180 branches network spread 147 geographical locations in 28 states and union territories across the country. Bank has also established representative office overseas each in Dubai and London.

Since its setting up bank has been driven by state-of-the-art technology. Bank has multi-lateral tie-ups with other banks to provide access to more than 18000 ATMs for its customers.

It enjoys clearing bank status for both major stock exchanges - BSE and NSE - and three major commodity exchanges in the country - MCX, NCDEX, and NMCE. It also offers DP facilities for stock and commodity segments.

According to bank statement bank has been awarded the highest A1+ rating for its Certificates of Deposits by ICRA and the highest P1+ rating for its FDs by CRISIL. CRISIL has also allocated the highest safety ratings to the Bank's Pass through Certificates for securitized assets.

Banking industry should be consolidated to empower larger banks

In Bangalore banking conference was organized by Mint where discussion on consolidation of banks, competition and inclusion was taken up by the chairmen and CEOs of several banks.

During the discussion the Reserve Bank of India (RBI) deputy governor V. Leeladhar said that he is in favor of consolidation of the banking industry so that larger banks get more power to fight competition and expand its reach to the unbanked areas. He added that all through this process the regional and cooperative banks should also be taken along as they play a crucial and at times have a distinct hand in financial inclusion.

He added, “If we think that commercial banks will be able to...(practise) financial inclusion in a cost effective manner in rural areas, we are 100% mistaken”. He further added, “It is left to the rural and urban cooperative banks and many other arms of the financial system to achieve the obligations of financial inclusion”.

He informed that RBI on its part has been constantly encouraging urban and rural cooperative banks to become strong and self-sufficient. This year RBI is giving licenses to cooperative banks to open new branches to expand their network across the country.

Leeladhar informed the gathering of chairmen and CEOs of several banks, “We have permitted them to have ATMs (automated teller machines), which is a big development. We have permitted them to have currency chests, which were never permitted”. A currency chest is a vault or safe that belongs to RBI but is kept on the premises of a bank and managed by it on behalf of RBI.

He point out, “We have convinced the state governments to initiate audit of the banks, with deposits of more than Rs25 crore, by professional independent chartered accountants as against the earlier system of audit by people who had no prior experience in auditing”.

He further added that commercial banks should expand and consolidate to enter the global markets. He said, “I still feel, as I used to advocate when I was chairman of Union Bank, that we do not require such large number of small commercial banks…we require small numbers of large banks.”

Comparing the situation with Malaysia where the number of banks has come down to eight to nine large banks after consolidation from 38 earlier, Leeladhar told the gathering that even in India after the consolidation there could be healthy competition among large banks. After consolidation large banks will have more influence in the international arena due to the size of their balance sheets, which is not possible in a current scenario with fragmented banking industry otherwise, he added.

“I have seen hundreds of applications by our commercial banks rejected by other countries saying, ‘What is the size of your bank? Why do we require such small banks to open branches in our country?’ There are many cases like this where applications have been rejected only because we look like pygmies in that whole system,” he said.

However the deputy governor of India’s banking regulator, made it clear that consolidation of banks should not be done at the cost of inclusion which is the main agenda of both the central bank and the government. In fact, he said regional and urban cooperative banks can reach out to the masses more easily with the responsibility of financial inclusion.

Leeladhar suggested that commercial banks to attain wholesome financial inclusion should help in strengthening the system of regional rural banks (RRB) and other cooperative bodies. “Look at RRBs of Canara Bank, look at RRBs of Syndicate Bank…how well they are functioning! At the same time, look at RRBs of Uco Bank or United Bank, you will see they are incurring huge losses,” Leeladhar said. “Which only goes on to show that in this concept, bank supervision counts,” he added.

“Some RRBs have far superior customer service than the sponsor bank or other commercial banks, private and public, that we are so proud of. I have observed that they have a genuine concern for their customers. Which only shows that they can independently handle financial inclusion in an effective manner,” Leeladhar said.

Union Bank to launch mobile banking by month end

Mr TY Prabhu executive director of State-run Union Bank of India informed by the end of this month bank will be launching mobile banking. He said bank has tie-up with Chennai-based BK Systems as its technology partner for offering this service to its customers.

He said, “The bank expects to launch the service by the end of June and is presently undertaking the process of implementation.”

Mr Prabhu said bank also has plans to offer full-banking services to its customers through mobile phone through the roll out of M-banking which will include account-to-account money transfer, mobile payments, and account status enquiry among other services.

Previously in December last year UBI had launched SMS banking services allowing its customers to avail basic banking services such as availing account information, mini statements on the last few transactions and making cheque book requests by sending SMS.

In the meantime, State Bank of India, country's largest lender, have plans to launch mobile-banking service around the same period and has tied-up with a Mumbai based technology company, to offer service to its customers.

Bank of Baroda to expand overseas network

Bank of Baroda has planned to open 10 new branches in overseas as its expansion strategy. At present bank has made its presence in 25 countries with 71 overseas offices and one joint venture in Zambia, is planning to make its presence in China, Australia, and New Zealand and have plans to open a branch in the Gulf region during the current financial year.

At the press meet BoB chairman and managing director MD Mallya told reporters that the bank will be converting its representative offices in China and Australia into full-fledged branches and open one new branch in the Gulf region. He added there is a proposal to open four more branches in Trinidad and Tobago and to open one more branch in the United States, however already branch exists in New York. This year bank has plans to open one electronic banking service unit in Abu Dhabi.

Mallya informed that bank had opened 11 branches abroad last year. He said bank gets 20 per cent of overall business from overseas branches.

Banks find lending to poor profitable through micro - finance

In India banks are now thinking of micro-finance. With the introduction of micro-finance, MFIs (micro finance institutions) and other NBFCs began lending to the poor. Banks are finding lending to the poor profitable. Through their micro finance banks lend directly to the borrowers or they team up with MFIs and other NGOs who help them in recognizing and grouping the members into various SHGs who are then given finance. On these loans bank charge interest at sub prime lending rates.

For instance S Parimala of Saligramam can think her lucky. She is part of a SHG (self-help group) which is engaged in glass and emboss painting. Her SHG name Lucky was recently granted a second loan of Rs 3 lakh after the group successfully repaid its first Rs 1 lakh loan it had taken from the bank in EMIs of Rs 10,600 spread over 10 months.

But, Parimala is upset because while the group had asked for a loan of Rs 5 lakh, the bank lent her only Rs 3 lakh. For this reason when it comes to borrowing money, the poor, especially the rural folks, are at the mercy of money lenders.

In the beginning, the average loan given out is usually below Rs 10,000. Moreover banks normally persuade SHGs to first open a savings bank account before giving credit.

"We initially observe the saving patterns of the group, how they save, lend and distribute money amongst them before giving them credit,” says Manohara Raj, senior vice-president, HDFC Bank.

More and more banks are opting for micro finance, so much so that many banks are opening exclusive branches that deal only in micro finance. Indian Bank, in 2005 opened its first micro finance branch at Chetpet in Chennai, has added 11 more micro finance branches to its network in India.

The bank plans, this year, to open 13 more micro finance branches. "It's an established fact that by being part of self help group, women are able to carry out economic activity more effectively.

Also, they need not borrow money at usurious rates of interest from money lender any longer,” says MS Sundara Rajan, CMD, Indian Bank.

HDFC Bank a leading private sector bank is strengthening micro finance business. Currently it is having four micro finance branches located in interiors of Tamil Nadu. About 15% of bank's micro finance business is generated from four branches. It is also planning to open few more micro finance branches this year.