Don’t sign papers without knowledge of contents – Lalit Srivastava

Lalit Srivastava, Banking Ombudsman of the Reserve Bank of India (RBI) for Punjab, Himachal Pradesh, Chandigarh, Panchkula, Ambala and Yamunanagar has stressed that before signing a document, one must study its contents carefully and not sign it “in good faith”, since the contents of the document are considered binding in a court of law. During an interaction with people at Yes Bank in Sector 9, Chandigarh on Friday, Srivastava said that a common grievance among many people is that they were swindled of their money after signing a document but were not aware of its contents. The Banking Ombudsman highlighted that such ignorance is not accepted legally. Srivastava pointed out that during the last year and a half during his stint as Banking Ombudsman, he had received about 6,000 complaints from the areas under his jurisdiction. "About 2,000 of these were not maintainable on various grounds and were dismissed. The remaining 4,000 were taken up and in a large number of cases, the decisions went against the bank concerned. Almost all the decisions were accepted and implemented by the bank and there would be only 10-15 cases where the bank appealed against the order to the RBI Deputy Governor. If the complainant is not satisfied with the order, he too can seek remedy in a court of law,” said Srivastava. He highlighted that any person who has a grievance against a bank should first lodge a complaint with the respective branch and await the bank’s reply for a month.

RBI warns on inflation risk; rate rise seen

The Reserve Bank of India (RBI) said inflation may stay high for longer than earlier anticipated due to a rise in global commodities prices and domestic supply pressures that have pushed up food prices. The central bank also said downside risks to growth had receded.  After raising rates six times since March to tame inflation, the central bank paused in December but indicated at the time that further rate hikes were possible, with inflation remaining well above its comfort zone. “As a result of newer factors and increased risks, the inflation trajectory is likely to show some persistence and moderate only gradually.” The central bank also called for measures to address structural drivers of inflation, which include inefficiencies in the agricultural sector. A sharp rise in food prices, a key driver of inflation in India, has been putting upward pressure on broader prices. The wholesale price index, the most widely watched gauge of prices in India, rose 8.43% in December from a year earlier, compared with 7.48% in November and well above the RBI’s March-end projection of 5.5%.

RBI Credit Policy: Debt instruments stage a comeback

The interest rates in the debt market that are already at quite high levels due to the multiple rate hikes by the RBI last year are expected to harden further in the near term. The RBI expressed concern over the high inflation rate due to the sharp increase in food, energy and commodity prices, and gave indications of further monetary tightening, going forward, to tame the inflation rate. The monetary policy tightening by the RBI has brought debt instruments back into the limelight as their yields have gone up due to the interest rate hardening. The rates on bank fixed deposits have gone up to almost nine percent levels. On the other hand, the volatility and stretched valuations in the stock markets have tilted the risk-return equation towards risk. Therefore, risk-averse investors are increasingly looking at increasing their portfolio allocation to debt-based instruments.

HEED RBI’S WARNING

On Tuesday, the eve of Republic Day, Reserve Bank of India Governor D Subbarao sent out a clear warning: inflation was here to stay due to a variety of factors, both domestic and global. His prescription for controlling inflation — raising interest rates by a mere quarter per cent — has come in for much criticism from economists who feel that the unabated inflation, which worsened in December, warranted a much bigger rate hike to signal that easy credit will not be tolerated any longer. Credit or loans by banks has grown faster than what the RBI projected, while growth in deposits has slowed. Dr Subbarao felt anything over a quarter per cent hike would limit his leeway in case inflation remains stubbornly high in the coming months. The RBI’s objective is limited to curbing inflation, which is spilling over from food to manufacturing. It is well known that monetary tools for controlling inflation are limited when it is caused mainly due to high food prices — particularly of items of daily consumption such as fruits, vegetables, milk, eggs, fish. The RBI chief stressed the need for “rapid action” to increase the output of several products whose demand is rising due to changing consumption patterns, reflecting increasing incomes. The government would do well to heed Dr Subbarao’s warning: unless meaningful output-enhancing measures are taken, the risk of food inflation getting entrenched looms large. The government should realise that food imports are not an easy option, given that global food prices have risen by 25 per cent in December, according to FAO estimates. A top FAO official noted in Davos earlier this week that the current world food crisis could be ascribed to falling investments in agriculture. Much of the rise in food and commodity prices can also be blamed on speculation — it would be in India’s interest to support French President Nicolas Sarkozy’s proposal to curb speculation in all commodities. The FAO official said he felt prices could get out of hand unless all futures markets were regulated — in fact he warned of the possibility of food riots like those seen in 2007-08. For the Manmohan Singh government, meanwhile, time may be running out — the importance of finding an urgent solution to the food crisis simply cannot be overestimated.

Credit Policy targets inflation

India's annual industrial output in November grew at its slowest in 18 months but headline inflation in December accelerated with costlier food items. These confirmed expectations of a rate increase. The RBI said demand-supply mismatch and rising global commodity prices will continue to put pressure on inflation, which could hurt economic growth. 'Persistent high inflation could endanger the growth objective and also amplify risks to inclusive growth. Containing inflation will have to be the predominant objective of the monetary policy in the nearterm', the RBI said in its macroeconomic review released on the eve of the quarterly policy.  It further said the upside risk to inflation has increased, and supply side constraints and high global commodity prices could dampen the impact of a tight monetary policy. According to the RBI, while inflation is likely to soften in the coming months, it is likely to stay elevated above the earlier anticipated path. It has projected overall inflation to be at 5.5 percent by March end. The overall inflation for December shot up to 8.43 percent on high prices of food items, from 7.48 percent in November. The RBI said continued high food inflation is the main cause for the overall inflation holding up, adding that return of inflation to a more acceptable level will be gradual.