24 february 2007

forex reserves top $188 billion
mumbai: the country's foreign exchange reserves rose by nearly $4 billion in a week to a record high $188.912 billion on february 16 from $185.078 billion a week earlier.

foreign currency reserves had risen by $5 billion in the week to february 9, and have now risen by $11.7 billion since december 29, the reserve bank of india (rbi) said.

analysts attribute the spurt in foreign exchange reserves to probable central bank intervention in the currency market to cap the rupee.

the rupee has risen 6.4 per cent from a three-year trough of 47.04 per dollar last july to 44 per dollar currently.
forex traders say the central bank has been intervening in the market since november last year, and appears to have stepped up its efforts in february, capping the rupee at a 16-month high of 44.03 on february 9.

the rbi bought $5 billion in intervention in november and december, according to official data. the central bank had also intervened in may, when it bought $504 million. it bought a total of $8.14 billion in the financial year to march 2006. intervention figures for january and february were not available.

however, the rbi purchases were less compared to $20.85 billion it bought in 2004-05.

the rupee has been gaining on the strength of foreign funds flowing into the booming indian economy, but has lost some momentum this month due to rbi intervention and end of the year considerations.

rbi to pay interest on banks' crr
mumbai: the reserve bank of india (rbi) will pay interest on the accumulated cash reserves of banks under the mandatory cash reserve ratio (crr) prescribed by the central bank.

rbi said it would be paying an interest of 3.5 per cent for the 24 june, 2006, to 8 december, 2008, period. for the period from 9 december, 2006, to 16 february, 2007, the rbi would pay interest at the rate of two per cent.

besides, the rbi would also pay a one per cent interest for the period from 17 february, 2007, till further notice. it also stated that it would not be charging any penalty on failure to maintain crr.

the rbi had on 22 june, 2006, decided to continue status quo on the rate of cash reserve ratio (crr) to be maintained by scheduled banks and the extant exemptions; to remove the statutory minimum crr maintenance requirement of three per cent; and hence not to pay any interest on the eligible crr balances maintained by scheduled banks with effect from the fortnight beginning 24 june, 2006.

subsequently, on 9 january, 2007, the rbi has notified that all the provisions, except section 3 of the reserve bank of india (amendment) act, 2006, which provided for removal of the floor and ceiling on the crr shall come into force.

22 february 2007

rbi specifies norms for doorstep banking
mumbai: doorstep banking services will now be available as the reserve bank of india has issued guidelines for banks on "doorstep banking." it has also allowed banks to either deploy their employees or hire agents to extend these services.

thus individual customers can have cash and other bank instruments picked up from their home or office while only demand drafts will be delivered. corporate customers can additionally have cash delivered against cheque received at the bank's counter.

the new guidelines allow banks to extend cash delivery services to corporate clients, public sector units and departments of central and state governments against the receipt of cheque at the branch, and not based on telephonic requests. individual customers cannot, however, avail of this facility.

similarly, the delivery of demand drafts for both individual and corporate customers will be done by debiting the account on the basis of requisition in writing or cheque received and not against cash collected at the doorstep.

the rbi has also cautioned banks about risks arising out of these services and asked them to prescribe cash limits.

according to the guidelines, banks have been asked to acknowledge cash collection by issuing receipts and ensuring that it is credited to the customer's account on the same day or the next working day.

the charges for these services would have to be prominently indicated on brochures.

20 february 2007

rbi targets money transfer sub-agents over kyc
mumbai: reserve bank of india has now turned it scanner on money transfer sub agents over the know-your-client norms. these could be local shopkeepers or paanwallahs across the road.

last week, rbi sent across a circular to big players involved in the money transfer business, including principal agents asking them to submit a detailed note on the due diligence being conducted, while appointing sub-agents.

currently, apart from appointing direct agents such as banks, post offices, retail outlets etc., money-transfer companies also appoint small-time shopkeepers, traders etc., as sub-agents, who can transact business on behalf of the company.

an rbi officials said there should be someone entrusted with the onus of checking the credentials of small-time players and hence rbi is looking at evolving a policy wherein companies will be asked to perform certain checks on sub-agents' credentials and then they will have to revert to rbi for feedback.

before this, rbi had sent out another circular in the first week of february, which advised players against appointing players other than authorised dealers falling within categories i and ii, scheduled commercial banks, full-fledged money changers and the postal department as sub-agents.

other reports on finance diary