RBI Sets New Rules To Prevent Fraud

Money can corrupt a man's mind. If he sees too much of it floating around, he'd probably want to grab a handful of it. Take for instance the banking business. It's a place that's constantly dealing with huge sums of money. Think about the huge risks associated with it. It is no wonder that time and again banking frauds by rogue employees have led to major bank collapses. In India, just a few months back, the relationship manager at the Gurgaon branch of Citibank India was found to be involved in a multi-crore fraud. The risks will never go away. What one can do is build robust systems with effective controls and checks. Our esteemed central bank, the Reserve Bank of India (RBI) has chalked out new set of rules for banks that would help prevent frauds and irregularities. The RBI has directed banks to frame staff rotation and leave policies for employees working in sensitive areas of the banks such as the treasury department and also relationship managers handling the accounts of high-value clients. Staff rotation and leave policies are popular international practices that enable banks to keep a tab on the decisions taken and work handled by their employees. Such practices help create proper checks and act as deterrents against any wrongdoing that employees may be tempted to be part of. According to a notification by the RBI, these new rules have been introduced on the back of certain forensic studies at some banks due to the "occurrence of large value frauds or sharp increase in number of frauds at such banks". Additionally, the central bank has asked private and foreign banks to appoint chief of internal vigilance (CIV) officers. The responsibilities of these officers would be akin to those of chief vigilance officers in public sector banks. We believe that the RBI's move has been timely and will go a long way in strengthening the Indian banking system.

Loan Rates By Some Banks

The Reserve Bank of India today announced a hike in key policy rates in its bid to tame the raging inflation figures. The central bank raised the repo rate, its main lending rate, by 25 basis points to 6.75% and raised the reverse repo rate, or borrowing rate, to 5.75 %. Repo is the rate at which banks borrow from RBI and reverse repo is the rate at which banks park their surplus money with RBI. In the last one year RBI has raised rates eight times in small doses; the repo rate from 5% to 6.5% and reverse repo from 3.5% to 5.5%. With the rate of bank borrowing from the RBI going up 0.25%, will it translate into a loan rate hike for commercial bank borrowers? Experts say bankers are unlikely to hike their deposit or lending rates, as most banks had already raised their prime lending rates (PLRs) and deposit rates significantly in the last three months. Also, the prevalent lending rates are high enough and another round of lending rate hike and borrowers would not be a position to absorb further rises. Below is the existing loan rates by some leading banks Central Bank of India 13.75% Corporation Bank 13.60% Dena Bank 14.50% Dhanlaxmi Bank 17.25% HDFC Bank 17.25% ICICI Bank 17.50% IDBI Bank 14.00% Indian Bank 13. 75% PNB 13.00% SBI 13.00% So, fear not, for the time being loan rates will continue to remain the same. Go ahead and buy that car.