Asks banks to impose limit of $500 on all global cards, refrain from issuing such cards
In order to check frauds, the RBI has asked banks to impose monetary limit for international transactions on credit and debit cards and refrain from issuing cards with global access unless specifically sought by the customer.
"All the active magstripe international cards issued by banks should have threshold limit for international usage. The threshold should be determined by the banks based on the risk profile of the customer and accepted by the customer by June 30," it said.
Till the time of completion of the process a threshold limit not exceeding $500 may be put in place for all debit cards and all credit cards that have not been used for international transactions in the past, it said.
The notification has been issued following cyber attacks, which according to RBI has become "more unpredictable".
"Electronic payment systems are becoming vulnerable to new types of misuse, it is imperative that banks introduce certain minimum checks and balances to minimise the impact of such attacks and to arrest or minimise the damage," it said.
Besides introducing additional security features in the card, banks would also be required to put in place a real time fraud monitoring system and a mechanism to ensure that cards can be blocked through an SMS by the cardholder.
These initiatives, RBI said are needed to ensures that transactions effected through such channels are safe and secure and not easily amenable to fraudulent usage.
The announcement comes in the backdrop of a slew of card frauds that has taken place in the recent past leading to unauthorised withdrawal of sums by unscrupulous agents.
Small savings, which once constituted a major part of borrowing by states, are losing sheen, as reflected from the profile of borrowing mix of state governments.
Stock of National Small Saving Fund (NSSF) has been consistently declining over the last few months, data from Reserve Bank of India and a research report from credit rating agency Icra shows.
Even states such as West Bengal, which have been traditionally major contributors to the overall small savings mobilisation, have lost the edge to high-yielding saving instruments like chit funds, turning the corpus into negative. Recently, West Bengal Small Savings Development Officers Association demanded action against mushrooming chit fund companies in the east due to the steady decline in collections. According to Gautam Deb, leader of CPI(M), the small savings and post office collections in West Bengal during the April-October 2012 period were merely Rs 194 crore, against the targeted amount of Rs 8,370 crore.
However, data from various sources shows that the sharp fall in small savings is a national phenomena now. The Mid-Year Economic Analysis 2012-13 by government of India indicated that the net outflow under NSSF rose to Rs 13,600 crore in H1FY13, against Rs 6,500 crore in H1FY12, according to Icra.
Further, with RBI slashing interest rate, it is expected that the interest rate on small savings might also come down.
“While a lower policy rate would transmit to lower bank deposit rates, it is possible that the rates on small savings instruments for 2013-14 may be revised downwards during the annual review, dampening the relative attractiveness of the latter,” predicts ICRA
Around 2009-10, when the policy rates were low, small savings were an attractive option as bank deposits rates were lower. Thus, ICRA points out that the data published by the RBI indicated that the stock of NSSF loans of the 28 Indian States rose by Rs. 23100 crore in 2009-10 and nearly Rs. 40000 crore in 2010-11. By March 2012, the stock of NSSF loans by Rs 8200 crore in 2011-12. Thus, there was a net depletion of Rs 8,200 crore in the small savings corpus due to higher outflows than in inflows, explains Jayanta Roy, analyst at ICRA.
Notably, the mandatory allocation of net small savings collections to the states was reduced to 50 per cent from 80 per cent from 2012-13 onwards. States can exercise the option of either 50 per cent or 100 per cent of the net collections in their own territories. About 16 of the 28 states have opted to avail 50 per cent of net small savings collections in 2012-13.
According an August 2012 press release by the government, the net small savings collection in 2009-10 was about Rs 64300 crore, which came down to Rs 58600 crore in 2010-11, and went into negative by Rs 1900 crore in April –June period of 2012-13 fiscal.
Some of the popular small savings instrument include Public Provident Fund (PPF), National Savings Certificate and Post office savings schemes. To boost the popularity of small savings, the government had fixed the rate of interest on most small savings schemes in alignment with G-Sec rates of similar maturity, among various measures. While bank deposits offer up to 50-100 basis point higher interest rate than small savings, higher investments in gold and real estate have also led to shrinkage in small savings.
“The rate of savings itself is coming down, so there will be a decline in all forms of savings. Moreover, there has been more interest in investments like gold and real estate because it is seen as a hedge against inflation. Till the inflation does not come down, the savings rate will continue to be low,” said Devendra Pant, Director, India Ratings & Research, Fitch Group Company
With the NSSF corpus declining, the states opted to raise funds through market borrowing or state development loans (SDL) through the Reserve Bank of India window. In 2011-12, the net funds raised by the 12 states in the ICRA sample SDL increased by a steep 65 per cent in 2011-12 and a further 27 per cent in April-December 2012 in year-on-year (y-o-y) terms, the report says.
"All the active magstripe international cards issued by banks should have threshold limit for international usage. The threshold should be determined by the banks based on the risk profile of the customer and accepted by the customer by June 30," it said.
Till the time of completion of the process a threshold limit not exceeding $500 may be put in place for all debit cards and all credit cards that have not been used for international transactions in the past, it said.
The notification has been issued following cyber attacks, which according to RBI has become "more unpredictable".
"Electronic payment systems are becoming vulnerable to new types of misuse, it is imperative that banks introduce certain minimum checks and balances to minimise the impact of such attacks and to arrest or minimise the damage," it said.
Besides introducing additional security features in the card, banks would also be required to put in place a real time fraud monitoring system and a mechanism to ensure that cards can be blocked through an SMS by the cardholder.
These initiatives, RBI said are needed to ensures that transactions effected through such channels are safe and secure and not easily amenable to fraudulent usage.
The announcement comes in the backdrop of a slew of card frauds that has taken place in the recent past leading to unauthorised withdrawal of sums by unscrupulous agents.
With small saving corpus shrinking, states go for higher mkt borrowing
The net outflow under NSSF rose to Rs 13,600 crore in H1FY13, against Rs 6,500 crore in H1FY12, according to Icra
Stock of National Small Saving Fund (NSSF) has been consistently declining over the last few months, data from Reserve Bank of India and a research report from credit rating agency Icra shows.
Even states such as West Bengal, which have been traditionally major contributors to the overall small savings mobilisation, have lost the edge to high-yielding saving instruments like chit funds, turning the corpus into negative. Recently, West Bengal Small Savings Development Officers Association demanded action against mushrooming chit fund companies in the east due to the steady decline in collections. According to Gautam Deb, leader of CPI(M), the small savings and post office collections in West Bengal during the April-October 2012 period were merely Rs 194 crore, against the targeted amount of Rs 8,370 crore.
However, data from various sources shows that the sharp fall in small savings is a national phenomena now. The Mid-Year Economic Analysis 2012-13 by government of India indicated that the net outflow under NSSF rose to Rs 13,600 crore in H1FY13, against Rs 6,500 crore in H1FY12, according to Icra.
Further, with RBI slashing interest rate, it is expected that the interest rate on small savings might also come down.
“While a lower policy rate would transmit to lower bank deposit rates, it is possible that the rates on small savings instruments for 2013-14 may be revised downwards during the annual review, dampening the relative attractiveness of the latter,” predicts ICRA
Around 2009-10, when the policy rates were low, small savings were an attractive option as bank deposits rates were lower. Thus, ICRA points out that the data published by the RBI indicated that the stock of NSSF loans of the 28 Indian States rose by Rs. 23100 crore in 2009-10 and nearly Rs. 40000 crore in 2010-11. By March 2012, the stock of NSSF loans by Rs 8200 crore in 2011-12. Thus, there was a net depletion of Rs 8,200 crore in the small savings corpus due to higher outflows than in inflows, explains Jayanta Roy, analyst at ICRA.
Notably, the mandatory allocation of net small savings collections to the states was reduced to 50 per cent from 80 per cent from 2012-13 onwards. States can exercise the option of either 50 per cent or 100 per cent of the net collections in their own territories. About 16 of the 28 states have opted to avail 50 per cent of net small savings collections in 2012-13.
According an August 2012 press release by the government, the net small savings collection in 2009-10 was about Rs 64300 crore, which came down to Rs 58600 crore in 2010-11, and went into negative by Rs 1900 crore in April –June period of 2012-13 fiscal.
Some of the popular small savings instrument include Public Provident Fund (PPF), National Savings Certificate and Post office savings schemes. To boost the popularity of small savings, the government had fixed the rate of interest on most small savings schemes in alignment with G-Sec rates of similar maturity, among various measures. While bank deposits offer up to 50-100 basis point higher interest rate than small savings, higher investments in gold and real estate have also led to shrinkage in small savings.
“The rate of savings itself is coming down, so there will be a decline in all forms of savings. Moreover, there has been more interest in investments like gold and real estate because it is seen as a hedge against inflation. Till the inflation does not come down, the savings rate will continue to be low,” said Devendra Pant, Director, India Ratings & Research, Fitch Group Company
With the NSSF corpus declining, the states opted to raise funds through market borrowing or state development loans (SDL) through the Reserve Bank of India window. In 2011-12, the net funds raised by the 12 states in the ICRA sample SDL increased by a steep 65 per cent in 2011-12 and a further 27 per cent in April-December 2012 in year-on-year (y-o-y) terms, the report says.
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