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CAG Mehrishi questions RBI’s accountability over NPA crisis in banks

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New Delhi: Comptroller and Auditor General of India (CAG) Rajiv Mehrishi questioned the role of RBI in the present banking crisis, asking what the regulator was doing when the banks were lending huge amounts that resulted in asset-liability mismatch and huge bad loans.

The banking sector had non-performing assets (NPAs) or bad loans worth over Rs 9.61 lakh crore by the end of 2017-18, according to government data.

“In the present banking crisis, we all have a narrative about how it can be sorted out, recapitalisation of course, which is a very strange word to be used for the subsidies, but nobody is asking the real question that what actually the regulator (Reserve Bank) was doing. What is its role, what is its responsibility?,” he asked while speaking a the launch of Indian School of Public Policy (ISSP) here.

 

The major cause of current banking crisis is huge asset liability mismatch; but nobody is talking about this, there is a lack of public policy debate, Mehrishi said. He said India lacks a flourished bond markets in absence of which the banks are forced to lend to long-gestation infrastructure projects. And when these projects run into any hurdle, their difficulties percolate into the difficulties of the banks, he said.

The CAG also pointed out that there is a lack of public policy debate or a narrative on the root causes of the banking crisis; and also, nobody is talking or writing about the role of the regulator.

Despite from banks’ own mismanagement as well as theft of public money which are amongst the reasons behind the banking sector mess, there is much more to this which is complex to understand, he said further.

“If the banks were going berserk with their lending, then what was the regulator doing? And if it (regulator RBI) is accountable for this crisis or not, that is also a narrative nobody is talking about,” he said.

Of the over Rs 9.61 lakh crore banking sector NPAs as on March 31, 2018, Rs 85,344 crore emanated from agriculture and allied activities while the bulk of Rs 7.03 crore originated from loans to the industrial sector.

Speaking on economic reforms and the centre-state relationships in enacting changes, the chairman of the 14th Finance Commission and former Revenue Secretary N K Singh said the centre alone cannot bring about the economic overhauling.

“The economic reforms cannot merely be taken by the central government. For example labour reforms and the land reforms, it has been left to the skills of state government what they want to enact and believe the changes needed for economic reforms,” Singh said.

He also talked about the pedagogy built around the centre-state relationships and the unfinished agenda of India’s important economic reforms and said mere tinkering will not do and deep structural reforms are needed. He said India dearly needs the structural reforms and a lot of these relate to what the state governments can do in this direction.

The Indian School of Public Policy will begin its first batch of one-year full-time programme in public policy, design and management to professionals with 2-3 years of relevant experience from 2019.

The school intends to develop a new class of policy leaders for India by equipping policy professionals with knowledge, skills, wisdom and ethics to understand, design and implement local solutions to India’s enduring policy and governance challenges, ISPP said.


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RBI asks banks to grout ATMs to wall, floor for security by September-end

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Mumbai: The Reserve Bank asked banks to ensure their ATMs are grouted to a wall, pillar, or floor by September-end, except those installed in high secured premises such as airports, to enhance security of the cash vending machines.

In 2016, the RBI had st up a Committee on Currency Movement (CCM) to review the entire gamut of security of treasure in transit.

Based on the recommendations of the panel, the central bank has now issued instructions aimed at mitigating risks in ATM operations and enhancing security.

 

As part of the security measures, all “ATMs shall be operated for cash replenishment only with digital One Time Combination (OTC) locks”.

Also, “All ATMs shall be grouted to a structure (wall, pillar, floor, etc.) by September 30, 2019, except for ATMs installed in highly secured premises such as airports, etc. which have adequate CCTV coverage and are guarded by state/central security personnel”.

Further, banks may also consider rolling out a comprehensive e-surveillance mechanism at the ATMs to ensure timely alerts and quick response, it said.

The new measures to be adopted by banks are in addition to the existing instructions, practices and guidance issued by the RBI and law enforcement agencies.

The RBI also warned the banks that non-adherence of timelines or non-observance of the instructions would attract regulatory action including levy of penalty.

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SBI refuses to disclose communication from RBI, govt on electoral bonds

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New Delhi: The State Bank of India has refused to disclose any communication it received from the government or the Reserve Bank of India on electoral bonds, terming it “personal information” and held in “fiduciary capacity”.

Responding to an RTI filed by Pune-based activist Vihar Durve who had demanded copies of all letters, correspondence, directions, notifications or e-mails received from the RBI or any government department between 2017 and 2019, the SBI said it cannot be provided by it.

The bank cited two exemption clauses under the RTI Act to deny information — Section 8(1)(e) which pertains to information held in fiduciary capacity and Section 8(1)(J) which pertains to personal information of a person which has no link to any public activity.

 

“Information sought by the applicant cannot be disclosed as it is in fiduciary capacity, disclosure of which is exempted under Section 8(1)(e) and 8(1)(j) of the RTI Act, 2005,” the Central Public Information Officer of the bank said in his reply.

The bank also refused to give any details of action taken by it on such communications from the RBI and the government.

The electoral bonds, for giving donations to political parties, are being sold through SBI only. The sale opens in SBI branches when the Finance Ministry issues a notification of their sale for a given period.

The scheme of electoral bonds notified by the Centre in 2018 has been challenged in the Supreme Court.

Only the political parties registered under Section 29A of the Representation of the People Act, 1951 (43 of 1951) and which secured not less than one per cent of the votes polled in the last general election to the House of the People or the Legislative Assembly of the State, shall be eligible to receive the bonds.

The bonds may be purchased by a person who is a citizen of India “or incorporated or established in India,” the government had said in a statement last year.

The bonds remain valid for 15 days and can be encashed by an eligible political party only through an account with the authorised bank within that period only.

A voluntary group working in the field of electoral reforms, Association for Democratic Reforms (ADR), has demanded a stay on the sale while the CPI(M) has challenged it before the Supreme Court in separate petitions.

ADR recently filed an application in the Supreme Court seeking a stay on the Electoral Bond Scheme, 2018 which was notified by the Centre in January last year.

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Walmart’s Flipkart, Indian startup GOQii settle dispute over sharp discounting

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New Delhi: Walmart unit Flipkart has settled a legal dispute with an Indian startup that alleged it suffered losses because its products were sharply discounted on the global retailer’s website.

GOQii, a seller of smartwatch-type health devices, sued Flipkart last month in a Mumbai court, alleging its devices were discounted by around 70 per cent to the retail price, much more than the two sides had agreed. The court had, as an interim measure, ordered device sales to be halted on Flipkart.

In a joint statement , the companies said the dispute had been resolved and GOQii health devices would again be available on Flipkart. They didn’t say how the settlement was reached.

 

Vishal Gondal, CEO of GOQii, told Reuters the company would withdraw the case against Flipkart. The e-commerce retailer’s “team worked on a resolution benefitting the brand and the customers”, Gondal said in the statement.

The legal spat was seen as a test case of the giant retailer’s operating strategy in the country.

Small traders and a right-wing group close to Prime Minister Narendra Modi’s ruling party have raised concerns about large e-commerce companies, saying they burn billions of dollars deeply discounting some products to lure customers onto their sites, in the expectation that they will also buy other goods.

GOQii said it signed an agreement last year with a Flipkart unit to sell two of its devices at a price not below 1,999 rupees (USD 28.63) and 1,499 rupees. It later found the devices were being sold for 999 rupees and 699 rupees, calling it “unauthorized” discounting.

In response, Flipkart said it reserved “the right to institute actions for defamation, both civil and criminal”, arguing it wasn’t responsible for any discounts which are determined by third-party firms which sell via its website.

The two companies struck a friendlier tone in their joint-statement on Friday as they brought the legal battle to an end.

“We have ensured constant engagement with GOQii to resolve any differences,” Flipkart said in the statement.

With a 19 per cent market share, GOQii was the second-biggest player in India’s so-called wearables market last year, data from industry tracker IDC showed. The market is dominated by China’s Xiaomi, with Samsung a small player.

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