RBI allows foreign retail investments in tax-free rupee bond

Mumbai: The Reserve Bank of India on Tuesday allowed foreign retail investors, including non-resident Indians, to invest in rupee-denominated tax-free non-convertible bonds.

Funds raised through these bonds can be invested in infrastructure projects and in fixed deposits with banks. "It has been decided to permit resident entities, companies in India, authorized by the government of India, to issue taxfree, secured, redeemable, non-convertible bonds in rupees to persons resident outside India to use such borrowed funds for on lending, re-lending to the infrastructure sector and keeping in fixed deposits with banks in India pending utilization by them for permissible end-uses," RBI said in a statement.

It said the move will widen the investor base, help in internationalizing the currency and open another window for foreign investors.

At present, foreign institutional investors are not allowed to invest in tax-free infrastructure bonds issued by companies such as Power Finance Corporation, NAHAI, IIFL and Rural Electrification Corporation. Every year, the government allows some public sector companies to issue tax-free bonds.

Global investors have shown interest in rupee-denominated bonds. Recently, International Finance Corporation, the private finance arm of World Bank, had raised Rs 1,000 crore in the US by issuing rupee-linked bonds to global investors. IFC plans to raise a total of $1 billion. In such currency bond, the foreign investor will get proceeds in rupee.

"This will help in increasing the market base by including small and wide ticket size into Indian debt market," said Ashutosh Khajuria, president (treasury) at Federal Bank. "It is one step towards internationalisation of the currency." Since the bonds are rupee-denominated, volatility in the currency will not have an impact on the issuer. To that extent, external debt will be taken care of.

Allow customers to transfer accounts within bank: RBI to banks

Mumbai: Bank customers who change jobs or locations will find it easier to shift their bank account to the new location now. The Reserve Bank of India (RBI) has made it mandatory for banks to allow transfer of accounts from one branch to another without insisting on opening a fresh account or making the customer undergo the full know your customer process again.

Earlier, since the account holder's information was maintained with local branches, banks used to insist that customers go through the account opening procedure all over again when they shifted to a different location.

"It has been brought to our notice that some banks are insisting on opening of fresh accounts by customers when customers approach them for transferring their accounts from one branch of the bank to another branch of the same bank. Such insistence on opening of fresh account or making the customer undergo full KYC process again causes inconvenience to them resulting in poor customer service," RBI said in a circular to all banks. The circular added that given that most bank branches are now on core banking solution, records of a particular customer can be accessed by any branch of the bank.

An official with a new generation private bank, however, said, "We provide 'at par' cheque books to our account holders, which means that the cheques will be treated as local cheques no matter which part of the country they are deposited in. So, it really does not matter if the home branch is in a different city."

With all banks having put in place a core banking solution ( CBS) through which all account holder information is maintained in a centralized database accessible across branches, ATMs and internet, the home branch concept has lost relevance. But some private banks charge high fees for services accessed outside the home branch. For instance, most new generation private banks charge a fee for cash withdrawal at branches other than the home branch. Also, some lenders insist that changes in account services or document submission has to be done at the home branch.

In its monetary policy on April 17, RBI had asked banks to have a central customer ID to facilitate portability of accounts and ensure that all customer information is centralized. Some banks are seeing this as a precursor to having a central identity which will help customers transfer accounts across banks without having to repeat the KYC procedure.

"Banks are advised that KYC once done by one branch of the bank should be valid for transfer of the account within the bank as long as full KYC has been done for the concerned account. In order to comply with KYC requirements of correct address of the person, fresh address proof may be obtained from him/her upon such transfer by the transferee branch," RBI said.

RBI allows cross border remittances through mobiles

Mumbai: The RBI has permitted banks to enable cross border remittance between bank accounts through the medium of mobile, subject to clearance from the local regulator.

Banks will have to be responsible for ensuring quality of funds, adherence to know-your-customer, and so on, said Dr K.C. Chakrabarty, Deputy Governor, Reserve Bank of India, at an International Banking Summit.

Dr Chakrabarty said at the beneficiary end, the RBI has enabled loading of funds received from overseas under the Money Transfer Service Scheme on to a prepaid payment instrument issued by a bank to the recipient of the funds.

Uptrend in m-banking
Transactions in mobile banking have been showing an uptrend, according to Dr K.C. Chakrabarty, Deputy Governor, Reserve Bank of India.

During February 2012, more than 28 lakh transactions for close to Rs 196.12 crore were transacted; a 300 per cent increase in volume and more than 200 per cent in value terms as compared to 7 lakh transactions for close to Rs 61.61 crore during February 2011.

At present, 65 banks have been approved for conduct of mobile banking out of which 47 banks have commenced offering these services, said Dr Chakrabarty.

RBI to permit non-banking entities to set up ATMs

Mumbai: In a bid to accelerate the growth and penetration of ATMs in the country, the Reserve Bank of India on Tuesday said it plans to permit non-banking entities to set up, own and operate ATMs.

ATMs rolled out by non-banks will be like White Label ATMs (WLA) and will provide ATM services to customers of all banks, the RBI said in its Draft Guidelines for WLAs.

Non-bank entities proposing to set up WLAs have to apply to the RBI seeking authorisation under the Payment and Settlement Systems Act 2007. Such entities should have a minimum net worth of Rs. 100 crore at the time of making the application and on a continuing basis after issue of the requisite authorisation.

Being non-bank owned ATMs, the guidelines on five free transactions in a month for using other bank ATMs will not be applicable for transactions made on the WLAs. The charges for the transactions have to be displayed on the screen before the customer initiates the transaction.

'Sponsor Bank'
The WLA operator will have to declare one “Sponsor Bank”, which will serve as the Settlement Bank for the settlement of all the service transactions at the WLAs. The Sponsor Bank should be a member of one of the ATM networks authorised by the RBI and also be a member of the RTGS.

While the primary responsibility to redress grievance of customers relating to failed ATM transactions will vest with the Card Issuing Bank, the Sponsor Bank will provide necessary support in this regard.

The RBI's directives on the time-lines for resolution of complaints of failed ATM transactions will also apply to transactions at the WLAs.

The WLA operator can choose the location of the WLA. However, it will adhere to annual targets and the ratio of WLA between Tier I &II and Tier III-VI centres that may be stipulated by the RBI.

Thinksoft bags Rs.5-crore RBI order for testing solution

Financial software testing firm Thinksoft Global Services Friday said it has bagged a Rs.50-million (Rs.5 crore) order from the Reserve Bank of India (RBI) to deliver a user acceptance testing solution.
?We will deliver an automated regression test pack to the central bank using its in-house tool (Artemis) for financial services applications. The project management includes test strategy, planning and execution,? Thinksoft Chairman Asvini Kumar said in a statement.

The Chennai-based IT firm helps clients reduce software product life cycle costs and deploy `business ready software' within compressed timelines.

The deal is valued at Rs.50 million and the testing cycles will be completed in the next 12 months as the RBI is firm on getting the end state quality right. Our test automation framework will help achieve significant savings in test execution effort in a regression testing scenario,? Kumar said.

The central bank commissioned global consulting firm KPMG to help it in selecting an independent testing vendor.