The RBI lends short-term money to commercial banks at the Repo rate, while reverse repo rate is one at which the central bank borrows money from commercial ones. The repo rate was hiked by 25 basis points in June and further increased to 6.50% by the banking regulator – while the reverse repo rate was also hiked in a similar capacity to 6.25% on Wednesday.

Niranjan Hiranandani, national president, National Real Estate Development Council (NAREDCO)said: “From a real estate perspective, this hike will negatively impact buyer sentiment with the logical result on quantum of sales,” adding that the rate hike had come on the heels of a meeting with Union Housing and Urban Affairs Minister Hardeep Puri, in order to discuss measures to put the real estate sector “back on track”. Developers had discussed lowering GST and setting up a ‘Stressed Assets Fund’ to finish stalled projects by providing last mile funding.  He said that the government should take decisions to enhance buyer sentiment.

Jaxay Shah, the National president of Confederation of Real Estate Developers Associations of India’(CREDA), who was also part of the meeting, said: “Two consecutive hikes in the repo rate partially undo the policies for promoting affordable housing. We urge the government to expedite lowering effective GST on all housing to 8 per cent so as to preserve the growth impulses in real estate.”

The criticism was also echoed by Dhaval Ajmera, director of Ajmera Group, who said: “On one hand where the government is gunning big for ‘Housing for All’ and affordable housing, such moves are totally out of sync with the vision at the Centre.”

On the other hand, Rohit Poddar, managing director of Poddar Housing and Development Ltd on the other hand was less intimidated. “, “I personally believe that the home buyers should not worry as it will be difficult for many banks to increase the interest rate.” he said.

Similarly, Anuj Puri, chairman of Anarock Property Consultants, stated that the march-June quarter had recorded a 24 per cent increase in housing sales and 50 per cent increase in new launches. Puri said: “These numbers clearly indicate that the markets are now recovering from the shocks of structural changes and policy reforms. Serious end-user demand is back on the market and marginal hikes in home loan rates are unlikely to deter buyers.”

Conclusively, Ashwin Sheth, chairman and managing director, Ashwin Sheth Group said: “While this decision was taken to contain inflation, a rate cut at this stage would have offered some respite. We hope the RBI addresses this concern in the next announcement scheduled for October.’’

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Colin Bristow

March 17, 2017: Part 504 of the US Department of Financial Services Superintendent’s Regulations seems to be significantly upping the requirements for firms to put in place an ongoing review and improvement approach to anti-money laundering (AML) monitoring. But is it really very different from the broader suggestions from the inter-governmental Financial Action Task Force to introduce a continual review and improvement process for transaction monitoring?

Managing compliance

AML transaction monitoring solutions cut to the core of an organisation. They cross traditional boundaries, such as lines of business, cost centres and customer accounts. The risk-based approach requires an unprecedented level of transparency across platforms, and integration of these into a single system presents both risk and significant challenge. But even once the organisation has overcome these challenges and completed the deployment, the work is not over.

As soon as an organisation introduces a transaction monitoring solution, it needs a team and process in place to ensure ongoing compliance and fitness for purpose. The challenge for firms is maintaining this, because it can be very easy for business-as-usual activities to out-compete new initiatives.

The most effective AML alerting systems use a hybrid approach for detection of suspicious activity, automatically combining multiple data points to improve accuracy. Such techniques can range from business rules — Currency Transaction Report (CTR) limit being a classic — through to use of sophisticated analytical techniques to detect anomalies and outliers.

Sophisticated techniques require someone with a level of knowledge and understanding – more than just ‘an analytics person’. The ideal person will understand the business problems and underlying business process, but also have knowledge of transactions and analytics. They will need to be able to debate approaches, manage stakeholders, and deal with large volumes of data (raw transactional and alerts) to identify the most appropriate way to improve platform performance while also maintaining compliance. The job is much more than just turning down the volume of cases to a manageable level – a compliance oriented data scientist perhaps.

Generating dramatic improvements

If the approach to system improvement is completed appropriately, the improvements can be dramatic. False positives can be significantly reduced, which in turn improves the effectiveness of the investigations team and makes risk management more transparent. Overall, the disclosure rate is more effective. This can apply to legacy and new platforms.

But beware, an ongoing improvement model is missing key components – quality feedback from the investigative authorities. The proxy for feedback from the authorities then becomes disclosures made by the institution. But should the lack of accurate feedback stop the use of the information to drive improvement? It would sound like an excuse if it was.

The 504 regulation also outlines the need for greater transparency relating to system improvements, and documentation relating to why the system is set up as it is. Transparency regarding the use of certain analytical techniques is more important, so companies need to review and potentially reconsider their use of non-transparent techniques and approaches. For example, would neural networks provide an easily transparent view of decision-making processes? The regulation also shines light on threshold-based settings, so it’s important to be able to justify why particular thresholds have been chosen.

Finally, requirement 504.4 outlines the need for an annual certificate. This could focus and drive much-needed attention from senior compliance officers around the importance of having robust processes in place. Might this support firms in requesting additional resources for improvement?

A matter of time?

The final thought has to be ‘how long?’ Is it only a matter of time before this type of regulation becomes widely adopted across the EU and UK? Will some firms try to counter the move to increasing regulation? Generally, regulation from the US is adopted in some form, and at some point, in Europe. Perhaps the question is how many years or months will it be, and will there then be a mad dash to comply when it does arrive?

Colin Bristow is a consultant in retail banking at SAS UK & Ireland

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