Economic Developments:

• Exporters with advance licenses can now directly procure inputs (import) from special economic zones (SEZ) on the strength of their licenses without having to furnish any Advance Release orders (AROs). The suppliers against AROs could avail themselves of deemed export benefits, including refund of terminal excise duty.  

• RBI declared norms for dividend declaration by banks. The norms would be applicable for the accounting year ended March 31, 2005 onwards. Subject to compliance of certain minimum prudential requirements banks would be eligible to declare dividends without RBI’s prior approval. 

• Finance Minister while retaining the Fringe Benefit tax at 30% reduced the taxable value under six categories including entertainment and hospitality from 50% to 20%. Taxable value on the use of phones, other than leased lines was doubled to 20%.Companies were given a respite on their spending on sales promotion including publicity, while benefits were extended to software and pharmaceutical companies by reducing the taxable value on conveyance and boarding lodging to  5% as against 20% for other sectors.

• Cash Withdrawals from savings bank accounts would be exempted from cash withdrawal tax. Individuals and Hindu Undivided Family withdrawing over Rs 1 lakh a day would be required to pay 0.1% tax. Withdrawals from term deposits will also attract the cash withdrawal tax.      The income tax exemption limit for women has been enhanced to Rs 1,35,000 and for senior citizens to Rs 1,85,000.

• With a view to promoting Indian investment abroad and to enable Indian companies to reap the benefits of globalization, the ceiling for investment in overseas joint ventures (JV)/wholly owned subsidiaries (WOS) by eligible Indian entities under the automatic route, has been raised from 100 per cent  to 200 per cent of their net worth.

• RBI has advised all scheduled commercial banks to formulate a scheme for providing services at the premises of a customer within the framework of Section 23 the Banking Regulation Act, 1949. Banks may, therefore, formulate the scheme with their board’s approval and submit it to the Reserve Bank for approval.

• RBI has asked commercial banks to compensate the holders of Relief/Savings Bonds for the loss incurred by them on account of late receipt or delayed credit of the interest warrants/maturity value of their investments in these Bonds. The compensation should be paid at the current savings bank rate for the number of days of delay.   

• The National Commodity and Derivatives Exchange Ltd (NCDEX) has launched the agri composite index NCDEXAGRI. The index would act as a barometer of the agriculture sector’s performance. It also indicates the relative performance of the sector vis-à-vis the reference period and acts as a powerful information tool and benchmark for investment performance.  

• As per RBI guidelines,Banks which have maintained capital of at least 9% of the risk weighted assets for both credit risk and market risks for securities in the held-for-trading (HFT) category as well as available for sale (AFS) category, may treat the balance in excess of 5% of securities included under HFT and AFS categories, in the Investment fluctuation Reserves (IFR), as the tier-I capital. Banks satisfying the criteria may transfer the amount in excess of the said 5% in the IFR to statutory reserve. This transfer shall be made as a ‘below the line’ item in the profit and loss appropriation account. This would also provide banks more head-room for raising additional tier-II capital. 

• According to RBI guidelines, private sector banks wanting to merge must get the approval of two-third of the total strength of their boards and not just those present at the board meeting. Directors who participate in such meetings must be signatories to existing corporate governance covenants. The same norm will be applicable when a private sector bank is merging with a public sector bank.

• RBI has allowed listed companies (with a gilt account with a commercial bank) and urban co-operative banks (UCBs) who meet certain requirements to undertake repos with other market participants. RBI has permitted sale of Government securities allotted in primary issues on the day of allotment, with and between consistent subsidiary general ledger (CSGL) account holders.

• RBI has allowed banks to continue using the Mumbai inter-bank offered rate (MIFOR) to price derivatives deals in the inter-bank market. MIFOR is a combination of the London inter-bank offered rate and local dollar-forward rates. RBI allowed MIFOR swaps on an inter-bank basis, since a liquid MIFOR market is necessary to facilitate currency hedging.  But each bank will now have to seek RBI’s clearance on the size of trading positions it can take in MIFOR. 

• Draft guidelines for purchase/sale of NPAs have been issued by RBI.A financial asset, including assets under multiple/consortium banking arrangements, would be eligible for purchase/sale if it is an NPA/ non performing investment in the books of the selling bank. The purchasing/selling of NPAs should be conducted in accordance with a policy approved by the bank’s Board. A bank may purchase/sell NPAs from/to other banks only on ‘without recourse’ basis, i.e., the entire credit risk associated with the NPAs should be transferred to the purchasing bank. The selling bank should ensure that the effect of the sale of the financial assets should be such that the asset is taken off the books of the bank and after the sale, there should not be any known liability devolving on the selling bank.

• Effective April 16, 2005, all scheduled banks, which are negotiated dealing system (NDS) members and acting as issuing and paying agents (IPA) for commercial paper (CP) issuance, should report details of CP issue on NDS platform within two days from the date of completion of the issue. All scheduled banks should, however, continue to report CP issuance details as hitherto.

• For UCBs, prudential exposure ceiling in case of individual borrower and group borrowers has been revised effective 1^st April,2005 as under:                                                                              Individual borrower   : 15% of capital fund ( earlier position-20%                                           Group borrower         : 40% of capital fund ( earlier position-50%)

• RBI has released a draft  on banking ombudsman scheme for  public comments. While extending the ombudsman scheme to customers complaints relating to banks’ credit card operations, the scheme will also be available to those customers who avail of credit card products offered by subsidiaries of banks. Other changes proposed for inclusion are customer complaints such as delay in rendering service in various payments, delay in providing facilities promised in writing including those promised by DSAs, levying charges and forced closure of deposit accounts without prior notice etc.

•  Statement of Intent(SoI) will replace MoU between  government and  individual banks.  SoI  has been  prepared by  the Banking Division of Ministry of Finance in consultation with  the individual banks and would list  out the minimum assurance of business performance  by the public sector banks in the areas like return on  average assets and average net worth, EPS, capital adequacy ratio, growth in business, PS lending, net interest margin, NPA, cost to income ratio and  profit after tax. Banking Division would review the  the performance of individual banks based on  SoI on quarterly, half-yearly or yearly basis.

• In line with  Bank of England‘s committee approach, RBI has identified  four experts  who will figure as ‘outsiders’  in the secretive committee that will decide  interest rate and other monetary policy measures. They are Mr. Sankar Acharya, former chief economic advisor- Min of Finance, S.S.Tarapore, former RBI deputy governor, Dilip Nachney, academician and  R.H.Patil, chairman UTI Asset Management Company.

• In a major break through, the concerted efforts by all concerned has resulted in opening way outs for 2184 MW Dhabol Power  Project. The Special Purpose Vehicle(SPV) in the name of “Ratnagiri Gas and Power  Pvt Ltd” has been  floated by  GAIL and  NTPC  to revive  much talked about Dhabol project which was  lying idle over four years following disputes between  Maharastra State Electricity Board and Enron, the then main promoter of Dhabol project. The new company  will own and operate the assets of  the erstwhile Dhabol power company and  bring end to a protracted negotiations between  international financial giants and  their Indian counterparts.

• Apprehending the use of Participatory Notes(PN) as a conduit for money laundering, RBI has urged the government to impose  curbs on the use of PN to buy  stocks in sensitive sectors like banking, telecom and petroleum.

• Reserve Bank of India has decided to adopt the international usage of the terms ‘repo’ and ‘reverse repo’ under the revised scheme of Liquidity  Adjustment Facility with effect from October 29,2004.  Accordingly, the current ‘repo’ operation where the central bank absorbs liquidity will be termed, ‘reverse repo’ and ‘the reverse repo’ operation where Reserve Bank of India injects liquidity will be termed ‘repo’.

• Reserve Bank of India placed restrictions under Section 35(A) of the Banking Regulations Act, on the Surat-based the Royal Co-operative Bank Ltd. On 13-10-2004.  The Royal Bank was suspended from clearing house operations on October 6,2004.

• Reserve Bank of India specified the interest rates payable on premature deposit withdrawals from non-banking finance companies (NBFC), Miscellaneous NBFCs non-banking companies (MNBC) and residuary non-banking companies (RNBCs). Henceforth, on deposits called off after 3 months but before six months, no interest will be paid.

• Reserve Bank of India plans to extend the real time gross settlement facility from the existing 1,074 bank branches, to 3000 branches by the end of this fiscal.

• The Asset Reconstruction Company India Ltd. (ARCIL) is to increase its capital to Rs.100 crore from the existing Rs.10 crore.

• According to the government, the senior citizens savings scheme will be operationalised through authorised public sector banks in addition to the post offices. The scheme for senior citizens, which offers taxable interest of 9% per annum, was introduced on August 2 through post offices and now it has been decided to operate the scheme through all the branches of Public Sector Banks, which are operating the PPF scheme.

• Reserve Bank of India asked commercial banks to furnish information on their government bond holdings as on September 30th.  The Central bank has asked banks to disclose whether they have transferred government securities from categories like “held for trading” and “available for sale” to “held to maturity” basket and the kind of hit they have taken due to the reshuffle.

• Reserve Bank of India first quarter data (April–June) on Balance of Payments (BOP) for 2004-05 indicates that India’s trade deficit has touched a record high of $6.3 billion, increasing by 11% as compared to last year figure for the same period.

• The GDP growth rate registered during the first quarter (April–June) was 7.4% as compared to 5.3% in the corresponding period last year. The first quarter agricultural growth rate was 3.4% which reflects a spillover of the previous year’s bumper rabi harvest.

• Reserve Bank of India slapped Rs.5 lakh fine on citigroup’s Indian Banking unit, for flouting the RBI’s ‘Know Your Customer’ norms, with regard to not verifying the background of account holder Mr. Abdul Karim Telgi and his associates.

• Foreign institutional investors (FIDs) have pumped over $4.73 billion in the capital markets for the nine-month period ending September 2004,

Economic Developments 16th September to 30th September, 2004

• According to Reserve Bank of India, banks can now exceed the 25% limit of total investments under the held-to–maturity (HTM) category, but it should not exceed 25% of the net demand and time liabilities.

• Index of Industrial production (IIP) grew by 7.8% in April- July 2004-05 compared to 5.9% in the corresponding period last fiscal. 

• National Bank for Agriculture and Rural Development (NABARD) is setting up agri-clinics and agri-business centers for supplementing the existing networks to accelerate the process of technology transfer to agriculture

• RBI is planning to link more than 4000 currency chests via Indian Financial Network (INFINET) to its central office. The currency chests will be linked through the INFINET for direct upload by link offices and downloaded by regional offices with connectivity to deposits account department, route map for chests, access to inspection, remittance section.

• RBI has asked banks to consider setting up independent valuation cells.  It also wants banks to evolve a process of check listing to enable them to take note of any deficiency, while releasing funds to borrowers or monitoring their end-use.

• Indian Banks’ Association (IBA) has constituted an eight-member working group on tourism under the chairmanship of Indian Bank Chairman and IBA managing director B. N. Rao

• Taxpayers in 12 major cities can now get refunds upto Rs.25,000 directly paid in their bank accounts. Taxpayers will have to file their salary returns in a new “form 2E” or “Naya Saral” and give details of their bank account, to avail this new facility.

• The finance ministry has now held that interest on overdraft facility or cash credit facility offered to a customer by a banking company or a financial institution or any commercial concern would not be subjected to service tax.

• The Rs.9,000 crore Stressed Assets Stabilisation Fund (SASF), the special purpose vehicle which has been constituted to take over the non-performing assets of the Industrial Development Bank of India (IDBI), has got "deemed financial institution " status from the government.

• According to Asian Development Bank Outlook 2004 report, the rise in global crude oil prices and erratic monsoon are expected to slowdown India's economic growth to 6.5% during 2004-05 and 6% in the year 2005-06.

• According to the Controller General of Accounts, the revenue deficit has touched a staggering 82.6 % of the budget estimate of 2.5% of GDP. The rise is mainly on account of poor growth in revenue receipts.

• According to RBI India has posted a current account surplus of $1.90 billion for the quarter ended June 2004 as against a deficit of $637 million in the corresponding quarter of the previous year while capital account ended with a surplus of $5.6 billion as against $6.1 billion last year during the same period. The BOP surplus grew to $7.2 billion during April- June 2004 as against a surplus of $5.4 billion in the same period last year.

Economic Developments 1st September to 15th September, 2004

• Taxpayers in 12 major cities can now get refunds up to Rs.25,000 directly paid in their bank accounts. Taxpayers will have to file their salary returns in a new “form 2E” or “Naya Saral” and give details of their bank account, to avail this new facility.

• Punjab National Bank opened a representative office at Shanghai (China).

• CRISIL upgraded the bond ratings of 4 public sector banks–Bank of Baroda, Canara Bank, Indian Overseas Bank and Syndicate Bank.  BOB’s Rs.600 crore bond programme has been upgraded to ‘AAA/stable’ from ‘AA+’.  Three bond programme of IOB ( of Rs.175 crore, of Rs.150 crore and Rs.125 crore have been upgraded to ‘AA+ / stable’ from ‘AA/stable’.  The certificates of deposit programme have been reaffirmed a rating of ‘P1+’.  Syndicate Bank’s Rs.125 crore bond programme was   upgraded to ‘AA+ / stable’ from ‘AA/stable’.

• RBI directed banks and financial institutions to promote Corporate – linked small and medium enterprise (SME) cluster models.  These directives are in line with the recommendations of a working group headed by A. S. Ganguly to facilitate flow of credit to the SSI sector.

• RBI has asked banks to consider setting up independent valuation cells.  It also wants banks to evolve a process of check-listing to enable them to take note of any deficiency, while releasing funds to borrowers or monitoring their end-use.

• Non food credit extended by scheduled commercial banks has increased by Rs.58,220 crore during the period April-August, 20, 2004.  This is against an increase of Rs.5,639 crore in the corresponding period last year.  The rise in non-food credit this year has been due to increased lending by banks to infrastructure and related projects including power, roads and ports.  Housing and retail loans have also accounted for significant part of the increase

• RBI cancelled the certificate of registration of non – banking financial companies including Hyderabad – based Dalia Securities Ltd., Chillakuru Investments Pvt. Ltd., the Mumbai based Dani Finlease Ltd and Hyderabad based Girija Investments private Ltd. for carrying on business of non-banking financial institution.

• NBFC Baba Farid Investment Pvt. Ltd. opted to exit from the business of non-banking financial institution.  Consequently, RBI cancelled the company’s certificate.

• Indian Bank’s CMD  Sri M B N Rao received the award for overall excellence in lending to the agriculture sector during the year 2003-04 from Hon'ble Union Finance Minister, P. Chidambaram. Indian Bank disbursed Rs. 379 crore to the agriculture sector during 2003-04.

• Hon'ble Finance Minister P. Chidambaram awarded  trophy to  ICICI Bank, PNB, IOB, Indian Bank, Allahabad Bank, State Bank of Indore, State Bank of Patiala, State Bank of Saurashtra and Ganesh Bank of Karudwali for their excellent performance in achieving the target of direct agriculture advances.

• RBI, on 11^th September, 2004, raised the CRR for banks from 4.5% to 5.0% to be effected in two steps of 25 basis points each on September 18 and October 2, 2004.  The Central bank also cut the rate of interest payable on eligible cash balances maintained with it by banks by 250 basis points to 3.5%. The CRR hike is expected to suck out liquidity to the tune of Rs.8,000 crore and the interest loss on account of the 250 basis points cut in interest rate on eligible CRR balances has been estimated at around Rs.600 crore for the banking system as a whole.

• HSBC has been voted “Global Bank of the year’ by the Banker magazine.

• RBI, on 13 September 2004 permitted Sri Lankan Citizens to purchase shares or convertible debentures of an Indian company under the FDI scheme.

• RBI has allowed banks to open branches to exclusively perform central processing on back-office operations. 

         Economic Developments 16th August 2004 to 31st August 2004

• The Government is planning to waive the onus of providing bank guarantee for various transactions for exporters with minimum three years of slur free deportment.

• The Institute for Development and Research in Banking Technology (IDRBI) has set up the National Financial Switch to facilitate connectivity between the Bank’s switches and their ATMs.

• Corporation Bank won the “Best Bank award for Delivery Channels” for the third consecutive year, from Institute for Development and Research in Bank Technology.

• RBI put the Mumbai – based Maratha Mandir Cooperative Bank under ‘directives’ restraining it from conducting banking business. The other banks in doubt are South Indian Cooperative Bank in Mumbai City Cooperative Bank in Surat and Punjab and Maharashtra Cooperative Bank.

• Industrial finance Cooperation of India may be merged with industrial Development Bank of India.

• RBI in consultation with the SEBI directed bank and financial institutions (excluding RRB) to convert all their equity holding into dematerialized form by the end of December, 2004.

• Net NPAs of 19 listed Public Sector banks declined by 3.6% in the quarter ended June, 2004.

• RBI cancelled Patni Co-operative Bank’s licence.

• RBI to set up a steering committee to implement the new stringent international BASEL-II norms for capital adequacy by 2006.

• Finance Ministry is considering a proposal to merge two infrastructure finance institutions IL & FS and IDFC with IDBI.

• RBI is considering proposals to allow primary dealers to invest is overseas sovereign bonds and also open offices abroad by floating subsidiaries or joint ventures.

• Bank of England has raised the rate of interest by 25 basis points to touch a three years high of 4.75%. This is done for the fifth time since November, 2003.

• Indian Exports are targeted to cross. $ 70 bn.  mark in 2004-05. Exports had reached a figure of $61.8 bn. during 2003-04.

• Indian Banks’ Association (IBA) has formed a committee of bankers to chart out the framework for consolidating the Indian Public Sector Banks (PSBs). The committee consists of five members : Mr. V. P. Shetty, CMD, UCO Bank; Mr. S.C. Gupta, CMD, Indian Overseas Bank; Mr. M.N. Sinor, Chief Executive, IBA; Mr. M.R.Umarji, Chief Legal Advisor, IBA and Mr. V. Leeladhar, CMD, Union Bank of India; Mr. V. Leeladhar who is also the Chairman of IBA will be heading this committee too.

• The Kisan Credit Card Scheme (KCC), which currently provides short term credit to about 4.14 crore farmers, is now being broadened in scope to cover in its ambit the requirements of term credit as also the working capital for agriculture.

• A report of Parliamentary Standing Committee on Agriculture has stated that only 8 of the 26 public sector banks were able to meet the target of lending 18% of their net advances to agricultural sector in the year 2003-04. While Punjab National Bank, State Bank of Indore and State Bank of Saurashtra were praised for exceeding the target, Corporation Bank, Bank of Maharashtra, Oriental Bank of Commerce, State Bank of Travancore and UCO Bank were specially named for their poor performance.

• RBI advised banks to obtain a declaration from the account holder, that she/he does not enjoy any credit facility with any other commercial bank. If the customer already has a current account with any other bank then banks are to procure the details of the credit facilities available to here/him.

• Gross tax collections of Centre increased by 22% to Rs.41,511 crores and net tax collections grew by 27% to Rs.24,306 crores in the quarter ended June 2004 over the same period last fiscal.

• Government has announced a new scheme named Senior Citizen Savings Scheme (SCSS) after the withdrawal of LIC’s Varishtha Pension Bima Yojana.

• Real Time Gross Settlement (RTGS) system of RBI which was initially opened for settlement of inter bank transaction in March 2004 and later extended to cover the settlement of customer transactions in April 2004, now has been enabled for “Straight Through Processing” at the bank’s end.

• RBI said that PSB should classify their defaulting state backed advances and investments are non-performing from the next fiscal.

Economic Developments 1st August 2004 to 15th August 2004 

• NCAER scales down its GDP growth forecast to 6.5 to 6.7%

• Forex reserves decline sharply by $ 1.53 billion.

• Oriental Bank of Commerce (OBC) is to take over the financially troubled Global Trust Bank (GTB). Currently GTB is under a 3 month moratorium.

• IDBI bank is to merge with IDBI to become a Universal bank.

• Government has permitted IOC, BPCL, HPCL and IBP to raise or lower petrol and diesel prices every fortnight up to 10% of a pre-defined  mean market price.

• US oil prices struck a 21 year high of $ 44 a barrel in the backdrop of raised security alert against possible Al-Qaida attacks on top financial institution.

• SEBI has asked the Stock Exchanges to disclose the buyers and sellers of GTB shares,  both before and after RBI slapped a moratorium on the failed bank.

• RBI has asked all the term lending institutions to provide for 100% of the outstanding under any loan that is classified as a ‘doubtful debt’ for more than three years after April’04.

• Senior citizens who have opted for VRS are now eligible to invest in 9% ‘Senior Citizen Saving Scheme’ even at the age of 55. The normal minimum age requirement for the scheme otherwise is 60 years.

• The Commerce ministry has set a 16% growth target for Exports in the fiscal 2004-05 against a 12% target the previous year.

• As per a report, overall GNPA of Public Sector banks has declined by around Rs.3,000 crores in the year 2003-04 over the year 2002-03.

• Centre’s service tax collections for 1^st Quarter of 2004-05 have amounted to Rs.2,400 cr. which is double that of the figure for 1^st Quarter in 2003-04.

• A report of ‘Standard & Poor Rating services’ has said that the Loan Quality of Indian Banks has improved.

• Government is likely to receive Rs.5,000 crore as dividend from RBI.

• RBI has directed co-operative banks to adopt the 90 day NPA norm by March, 2005.

• The Wholesale Price Index (WPI) based inflation shot upto a 3¹/₂ year high of 7.51% for the week ended July 24.

• Punjab tops the list of big states,  Pondicherry of small states and Chandigarh of Union Territories in India Today’s 2004 rankings of India’s best states.

• A CRISIL report has shown that Mutual Funds (MFs) raised Rs.23.82 billion through initial public offerings of new schemes in July compared with Rs.7.32 billion in June and Rs.5.75 billion in May.

• With the bond  yields hardening  over the last few  weeks, banks have  approached RBI   for approval  to use  investment fluctuation reserves (IFR) to  set off probable losses  arising out of  substantial  provisioning  against their huge  portfolio of Govt. securities.

• Government has initiated  an exercise to look at the operations  and  analyse the financials  of some Banks  to work out strategies including mergers  so as  to tackle the problems faced by them. 

• Indian banks with  current estimated  number of 13500  ATMs spread over the country  embark  on   huge ATM expansion drive  which is aimed at  growth of ATMs by another 5000 by the end of the year.

Economic Developments 16.7.2004 to 31.7.2004

• SBI sold its 37% stake in its mutual fund arm, SBI Fund Management to Societe Generale Asset Management

• Bank of Baroda is the first public sector bank to have been assigned corporate governance rating.  ICRA assigned a rating of CGR2 to BOB for its governance practices. HDFC Bank is the only other bank to have been assigned a similar rating GVC1, for governance and value creation by CRISIL.

• RBI directed banks that suppliers and buyers credit, including letter of credit (LCs), extended for direct gold imports should not exceed 90 days.  Banks will now have to ascertain the credentials of a supplier before opening LCs.  It will also have to examine if the financial standing, line of business and the net worth of the importer is equivalent with the volume of business turnover.

• According to RBI’s draft of the citizens, one can exchange mutilated notes and get credit in the bank account.

• IDBI Bank to merge with IDBI.

• RBI is planning to change the system of annual inspection of banks by making periodicity and coverage of its inspection commensurate with the rating of banks.  The ratings will be assigned based on earnings, asset quality and risk perception of banks.  According to the proposal the inspection cycle of the banks in A category will be elongated to once in 2 years, for B category banks, the inspection will be done once in 18 months and for C and D category banks, inspection will be conducted once in a year.  RBI plans to implement the revised inspection system after shifting to the risk based supervision (RBS) system.

• Banks are seeking to line up risk mitigation measures involving active participation of the state machinery to counter the menace of frauds in home loans.  Banks are actively considering preventive measures like creating equitable mortgage at the state registrar’s office so that a bank can run an online check to know whether another bank has a lien on a prospective borrower’s property.  They also want to have sale agreements/documents in dematerialized form to prevent forgery and multiple financing.

• According to RBI, State run banks accounted for 49.6% of total deposits placed with all banks in the country during the year ended March 31, 2004.

• RBI imposed a 3 months moratorium on GTB from 24^th July 2004 to 23^rd October 2004. GTB has a loss of Rs. 1500 crore. RBI announced an amalgamation of Global Trust Bank with Oriental Bank of Commerce.

• Rs. 742.20 crore is lying unclaimed with nationalized banks and other schedule commercial banks as on December, 2003.  The unclaimed amount in SBI group of banks was Rs. 145.67 crore, while in other nationalized bank, it was Rs. 504.21 crore.  The unclaimed amount in private sector banks was Rs. 50.31 crore and in foreign banks was Rs. 42.01 crore.

• EXIM Bank raises Rs. 200 crore by selling bonds maturing in two years, offering floating rates to attract investors.

• Bank of Baroda is the 1^st Public sector bank has been assigned corporate governance rating. ICRA assigned CGRZ to BOB for its governance practices.

• A self-regulatory Organisation for non-banking finance companies- Finance Industry Development Council has been registered.

• According to RBI policy document no private bank and foreign banks operating in India would be allowed to hold more than 5% stake in another private bank.  It also suggests capping the stake of one single entity or a group of related entities through the FDI route in private banks at 10%.  The same limit is applicable to FIIs also.  The players affected are ING Vysya (where ING holds 44%), UTI Bank (HSBC group has 14%), YES Bank (Rabo bank has 20%), Centurion Bank (Bank Muscat has 36%), Kotak Bank (36%), HDFC Bank (24%). Even ICICI Bank will have to pave its holdings in Federal Bank and South Indian Bank

• Promoters of new private banks may be allowed to start with a higher stake, but will be required to bring it down to 10% within three years.

• Top Indian companies raised and settled external loans at negative effective rates of interest in 2003-04, i.e., loan repayments including interest were less than the principal originally raised.  So ECBs / FCCBs were really not loans but investments.

• Allahabad Bank tied up with LIC   for Bancassurance.

• RBI directed banks not to issue smart/debit cards in tie up with any other non bank entities.

• The Credit Information Companies  (Regulation) Bill, 2004 is likely to be placed in the Parliament.  This bill apart from disseminating information about borrowers will also enable the collection and compilation of  data on the conversion of the same into information on the pricing of credit.  It will enable companies to register with RBI and help RBI regulate these companies, thus giving a boost to competition.

• According to the study by FICCI, FMCG sector has registered a growth rate of 1.5% in value and 4% in sales in 2003-04.

• GOI expects exports to grow by 16% to $ 73 billion in 2004-05 as compared to 2003-04.

• RBI plans to start a pilot project on image-based cheque truncation which eliminates physical movement of cheques at Delhi and its nearby areas is early part of 2005.

• NBFCs are not permitted to undertake credit card business without RBI’s approval.

• RBI to revise the norms for banks on repayment of rural housing loans so that the installments coincide with crop cycles.

• Govt. withdrew 3 savings schemes – The 6.5% savings (non-taxable) bonds 2003,  the deposit scheme for retiring government employees 1989 and the deposit scheme for retiring employees for PSUs 1991.

• Government has decided that each sponsor bank of the RRB under its control would be held squarely responsible for its performance.

• Canbank Mutual Fund signed an agreement of sale with GIC Mutual Fund to purchase all its existing schemes.

• RBI to auction (re-issue) 4.83% government stock 2006 for notified amount of Rs. 5000 crore under the MSS.

• RBI to transfer its stake to government in SBI, NABARD and NHB.

• The institute for Development and Research in Banking Technology (IDRBT) is setting up a National Financial Switch (NFS),  comprising of a national switch to facilitate connectivity between the different banks switches and their ATMs and inter bank payment gateway, for authentication and routing payment details of various e-commerce transactions and e-government activities. Clearing Corporation of India Ltd. (CCIL) will be the clearing and settlement agency for the switch, which will also facilitate the  disaster   recovery.

Federation

5TH Triennial Conference of Federation: 5th Triennial Conference of Federation was held at Lucknow from October 18th to 20th, 2003. The Open Session was held on 18th October, 2003. Shri Vishnu Kant Shastry, Hon'ble Governor of Uttar Pradesh could not inaugurate the Conference due to pressing official urgency. Shri V P Shetty, our Chairman & Managing Director and Com. K D Khera, President, AIBOC attended the Conference as Chief Guest and Guest-in-Honour respectively. Presence of large number of Officers of our Bank, members of fraternal organisations, leaders of Confederation and other dignitaries gave the occasion a festive look. Deliberations in the Open Session were lively and meaningful. The Delegate Session was held on 19th & 20th October, 2003. The report of General Secretary covering international, national, industry as well as Bank level events was placed. 54 delegates and observers participated in vibrant and meaningful discussion. The report was adopted unanimously. 11 resolutions and amendments to the Constitution were adopted unanimously. The Conference also unanimously decided for continuation of Com. S Roy Choudhury, General Secretary and Com. R C Khanna, President in the leadership even after their retirement from Bank's service. Uttar Pradesh and Utaranchal Unit organised a gala felicitation to Com. S Roy Choudhury, General Secretary on his retirement from Bank's service.

Maiden Secretariat Meeting: The maiden Secretariat Meeting of Federation for the current term was held at Kolkata on 30.11.2003. The meeting witnessed lively and meaningful discussions. Some important decisions including formation of various sub-committees of Federation, nomination to Bank's Board were taken in the meeting. The sub-committees of Federation as well as areas allotted to the functionaries are noted below :

Committees and Sub-Committees of Federation :

i) Committee for Preliminary Negotiation

ii) Committee for Negotiation

iii) Committee on Computerisation

iv) Committee on Manpower Assessment

v) Committee on Disciplinary Matter

Allotment Area for Deputy General Secretaries

Allotment Area for Organising Secretaries

Organisational Action Programme of Federation and Resolution of some IR Issues

Number of long pending IR issues of Federation remained either unattended or unimplemented for a considerable period of time. Federation was compelled to resort to organisational action programme. When Federation was in the midst of organisational action programme Phase II & III, the Management invited Federation in a Small Committee Meeting held on 3rd September, 2003. Discussion took place in a cordial atmosphere. Although all the issues could not be resolved, but some of the issues could be resolved either to the desired extent or to the extent possible under the present circumstances.

Definition of Headquarter for the purpose of TA

Bank decided to extend some sort of financial benefit to those officers not owning vehicle and undertaking official duty beyond 8 Kms. From Headquarter. Federation disagreed with the Management understanding of the issue as definition of Headquarter under bank's TA rule should be same as followed in peer Banks. It was decided that the issue would be negotiated further after obtaining data from peer Banks while financial benefit for undertaking official duty beyond 8 Kms. as decided by the Bank shall be extended.

Computer related Problems

Computer related problems such as review of DBA selection procedure, selection of Officer for computer audit, computer related problems (package related problems and other problems) etc. would be discussed exclusively in a Small Committee Meeting to be held on 17th & 18th September 2003, which was held as scheduled.

Anomaly in Fitment of 1997 Batch of Promotee Officers

Bank agreed to implement the recommendation of the Anomaly Committee w.e.f. 01.10.2003. Federation has, however, placed its demand to given effect from retrospective date.

Restoration of Sacrifices made under MOU

Bank agreed to restore the following sacrifices w.e.f. 01.10.2003.

i)   15% curtailment of Petrol reimbursement shall be restored.
ii)   Officiating allowance to be paid in number one position without any chain officiating allowance.
iii)  Officers attending training programmes for duration of more than 3 days will be entitled to travel by air, if

      they are otherwise entitled.
iv)  Officers while on official tour will be entitled to hotel accommodation according to their entitlement.

Residential Telephone Facility to Officers

All Heads of large branches in MMG Scale III will be provided with residential telephone facility. Basic rent @Rs.350 to be reimbursed.

Thereafter, at the request of the Management, Federation decided to keep the on-going agitational programme in abeyance w.e.f. 04.9.2003.

Small Committee Meeting on 17th & 18th September 2003

It was decided in the Small Committee Meeting held on 17th & 18th September, 2003 in presence of both the Personnel and Planning & Development Department that these departments will sit together to find out the total number of officers required in the computer field with a view to achieving Bank's Technology Road Map and thereafter, guidelines for selection and allied matter will be discussed with Federation.

Apex Level IR Meeting on 29.11.2003

An apex level IR Meeting was held at Kolkata on 29.11.2003. Number of issues were meaningfully discussed, which Federation expects to be resolved to the desired extent in near future.

Federation always believes that healthy and harmonious IR relation is the key to Bank's as well as Organisation's prosperity and growth.

II AIBOC

i)   Wage Revision

At the repeated instance of IBA Officers' Organisations brought down their demand from 35% to 20%. But, IBA has not increased its offer beyond 8.8%, which is far below our expectations of 20%.

ii)  Festival Advance to the employees of Public Sector Banks
IBA has revised the ceilings with effect from 14.10.2003, which is noted as below :

One month's emoluments (i.e. Pay + Special Pay + DA etc. but excluding HRA and CCA) subject to maximum of
    Rs.10,000/- for officers
    Rs.8,000/- for clerical staff and
    Rs.6,000/- for subordinate staff

iii)  Rates of Halting Allowance Payable to Officers

IBA has revised the rates of Halting Allowance payable to Officers w.e.f. 01.11.2003, which is mentioned as under :

iv) Invoking of Regulation 19 in syndicate Bank

Syndicate Bank is invoking Regulation 19 for removal/compulsory retirement of Officers on the plea of "Public Interest" without offering any reason.

v) Country-wide Strike by Bank Employees on 24.2.2004

The mass organisations as well as the Central Trade Unions have given a call for nation-wide strike on 24.2.2004 as mark of protest and demanding review of the Supreme Court decision on the workers' right to Strike. UFBU has decided to join them to strike work on 24.2.2004 on the following issues :

a) To oppose the Supreme Court verdict on the Right to Strike and demand for immediate review of the decision;
b) To demand early conclusion of wage revision;
c) To oppose anti-labour policies of the Government;
d) To demand second option of pension.

III. Recent Court Judgements having implications in Trade Union Functioning

i) Supreme Court Judgement in Bokajan Cement Corporation Employees' Union Vs. Cement Corporation of India Ltd.: A Retired employee can continue to be a member of a Trade Union

The Guwahati High Court has held that the right to continue as a member of the trade union continues so long as an employee is actually employed. While delivering judgement on 10th November, 2003 on the appeal preferred by the Union, the Division Bench of Supreme Court has said that the membership of a trade union is a valuable right which can be taken away only within clear parameters of the Act and the Constitution of the trade union. In the absence of any provision in the Constitution of the trade union for automatic cessation of membership as a result of cessation of employment, it can not be held that an employee would cease to be a member of the trade union in such an eventuality.

ii) Supreme Court Rules Equal Pay For Equal Work Not a Sacrosanct Doctrine

In a significant judgement in the case of West Bengal State Government Vs. Tarun Kumar Roy and others in Irrigation Department of West Bengal State the Supreme Court has set aside the verdict of Kolkata High Court. Referring to Article 14 of the Constitution envisaging the doctrine of equal pay for equal work, the Bench said that the doctrine did not contemplate that only because of the nature of work was same, it would be automatically applied irrespective of the employees' source of recruitment or other relevant consideration. The holders of higher educational qualification could be treated as a separate class. Such classification, if it is a trait, is reasonable. Employees performing the similar job but having different educational qualification, can, thus be treated differently.

IV. UCO Bank's Performance highlights for the period ended December, 2003

1) UCO Bank has reported a 3.08% growth in Net Profit to Rs.134 crores for the quarter ended December, 

    2003.
2) Operating Profit for the quarter stood at Rs.212 crores out of total Operating Profit of Rs.702 crores for the  

    nine months period as compared to Rs.464 crores reported during the corresponding period of fiscal 2002.
3) Total business of the Bank stood at Rs.51500 crores with a growth of 17% from Rs.44,000 crores

    business in December 2003.
4) NPA reduced to 4.06 in Dec'03 compared to 4.64% reported in Dec.'02 while Net NPA level has been

    brought down to less than 1% from 5.56% in Dec'02.
5) Overseas operation recorded a Net Profit of Rs.33.26 crores as against Net loss of Rs.10.15 crores in the

    corresponding period of previous year.
UCO Bank is planning to raise Rs.250 crores Tier II capital and total computerisation of 831 branches covering more than 85% of the branches.