DLCC approves action plan of Rs. 171.80 cr for district Ganderbal

Ganderbal, Feb 22: Lead District office Ganderbal convened a District Level Consultative Committee (DLCC) meeting today under the chairmanship of ADDC, Ganderbal, M. A. Hamdani. A Review of achievements was made under Annual Action Plan for the year 2010-11 as on December 2010. The Annual Action Plan of Ganderbal District for the year 2011-2012 was also approved by the house and other allied matters were deliberated and discussed in the meeting. The meeting was also attended by Raj Kumar Meena AGM (RBI), Kamaljeet Sani, AGM (NABARD), Mukhtar, CPO Ganderbal, heads of all line departments and district co-coordinators of all banks operating in the district. The ADDC stressed upon the sponsoring agencies and banks to expand their reach to the lower strata of the society by speeding up the process of flow of credit and make the loaning procedures simple and hassle free.

RBI to issue guidelines on new banking licences by March-end

New Delhi: The Reserve Bank of India (RBI) will issue guidelines for new banking licences by the end of the current fiscal. "RBI is planning to issue the guidelines for banking licences before the close of this financial year," Finance Minister Pranab Mukherjee said today during his presentation of the Budget 2011-12.  In the last Budget, it was announced that the Reserve Bank of India would consider giving traditional banking licences to private sector players, he said.  Following the announcement made by the Finance Minister, the Reserve Bank had brought out a discussion paper in August, 2010, on giving out new banking licenses to business houses and non-banking finance companies, besides regulations for the same to foster greater competition.  The RBI also sought to know "whether industrial and business houses could be allowed to promote banks." Furthermore, it sought stakeholders' views on whether NBFCs should be allowed to convert into or promote banks.  The RBI has received comments on its discussion paper from all stakeholders.  Various entities like Reliance Capital , IndiaBulls, Religare, IL&FS, IDFC, IFCI and Aditya Birla Financial Services are reported to be mulling entering the banking space.  At present, India has 26 public sector banks, seven new private sector banks, 15 old private sector banks, 31 foreign banks, 86 regional rural banks, 4 local area banks, 1,721 urban cooperative banks, 31 state cooperative banks and 371 district central cooperative banks.

Union Budget 2011: India's FY12 borrowing not a challenge: RBI

MUMBAI: The Reserve Bank of India (RBI) does not see any challenge in managing the borrowing programme for fiscal year 2011/12, a deputy governor said, after the government unveiled a lower-than-expected borrowing figure in its federal budget. "In the aggregate sense, as a reflection or as a per centage of the overall credit growth, overall deposit growth and so on, this (borrowing) does not pose too much of a challenge in our estimate in terms of managing," the Reserve Bank of India's Deputy Govenor Subir Gokarn told reporters on Monday. The government plans to borrow a gross 4.17 trillion rupees ($92 billion) in 2011/12, which would mean a net borrowing of 3.43 trillion rupees.  New Delhi's bond issuances in the next fiscal that starts April 1 had been forecast at 4.50 trillion rupees on a gross basis, and 3.77 trillion on a net basis, according to a Reuters poll, last week. The yield on the most-traded 8.13 per cent 2022 bond ended at 8.09 per cent, off the day's low of 8.05 per cent, but down 4 basis points from Friday. Gokarn added that liquidity situation should be less volatile in 2011/12 than the current year in the absence of any one-off gains in the next fiscal. The government had a windfall gain of 1.06 trillion rupees through telecom spectrum auction in first half of 2010/11, which had resulted in a sharp tightness in banking system liquidity. Banks, which had surplus funds in the first half, ended up borrowing more than 1 trillion rupees from the RBI in the second half due to the government's inability to expedite spending of its spectrum proceeds. Gokarn said the fiscal deficit target of 4.6 per cent of the gross domestic product would help provide some relief in terms of the macro-economic impact of the fiscal position. The government expects the deficit to be at 5.1 per cent in the current fiscal. "We have been saying the more expanded the fiscal position, the more pressure it puts on demand and, therefore, the more difficult it is to manage the inflation situation, the inflationary pressures coming from the demand side," Gokarn said. "This reduction in the deficit gives us some comfort that the correction is happening and it's happening significantly," he added.

RBI releases its IT Vision Document for 2011-17

The Reserve Bank of India has today, placed on its website, the Report of the High Level Committee (HLC) on the IT Vision of Reserve Bank of India 2011-2017. The HLC report includes the IT Vision document for 2011-17.

Main recommendations in the IT Vision document 2011-17

Focus for RBI

• Transforming itself into an information intensive knowledge organisation
• Harnessing human resource potential, migration to enterprise architecture for IT systems
• Adopting appropriate business process re-engineering
• Conforming to internationally accepted standards and usage of business intelligence from data warehouse for optimal Management Information Systems (MIS) with effective Decision Support Systems (DSS)
• Improving IT governance, effective project management, evolving well defined information policies as well as information security frameworks, better vendor management and outsourcing practices
• Reviewing of IT processes for better alignment between business objectives and IT.

Focus for Banks

The Vision Document sets priorities for commercial banks to move forward from their core banking solutions to enhanced use of IT in areas like MIS, regulatory reporting, overall risk management, financial inclusion and customer relationship management. It also dwells on possible operational risks arising out of adopting technology in the banking sector which could affect financial stability and emphasises the need for internal controls, risk mitigation systems, fraud detection / prevention and business continuity plans. Although banks have deployed technology for transaction processing, analytical processing by banks is still in a nascent stage. The Report urges banks to work towards reaping benefits of technology in terms of cost reduction of small value transactions, improved customer services and effective flow of information within the banks and to the regulator. The Reserve Bank will begin implementing the recommendations of the HLC shortly.

Background

The Reserve Bank has played a pivotal role in this process of transformation of the financial sector with the use of IT.  As the central bank, it has also strived to create a conducive environment for promoting technological adoption encompassing the financial sector.  Since IT has evolved over the years it is important that the financial sector too reviews the developments in this area and adapt itself to them.  Over a period of 15 years, DIT has satisfactorily fulfilled most of the objectives set to it at the time of formation. It has been instrumental in designing, developing and implementing IT-based systems, which have helped in the discharge of various functions of the Reserve Bank. As the developments in IT have a bearing on the role, functions and organisation of DIT, it is necessary to review its objectives. To steer the financial sector to achieve the desired technological goals, the Reserve Bank has brought out two vision documents encompassing the periods 2005-08 and 2008-10.  As the tenure of the previous IT vision document was 2008-10, it was incumbent upon the department to prepare the next version of the vision document for the period 2011-17. Against this background, the Governor constituted a High Level Committee (Chairman: Dr K C Chakrabarty, Deputy Governor, Reserve Bank of India) to prepare the IT Vision for 2011-17.  The terms of reference for the Committee were:

1. Review of the contribution of DIT in establishment of IT infrastructure in the Reserve Bank and banking sector over the period of fifteen years;
2. Preparation of Information Technology Vision Document for the period 2011-17, taking into account requirements and expectations of banking system in general and Reserve Bank in particular;
3. Keeping in view the IT Vision Document, redefining the role, functions and organisation of DIT;
4. Specifying the role of the department in meeting the information needs of the Reserve Bank and the society at large

The report of the Committee discusses the context in which the IT Vision Document has been prepared and gives strategy for achieving the goals set in the document. It also delineates the review of the contribution of Department of Information Technology (DIT) in establishment of IT infrastructure in the Reserve Bank and the banking sector over 15 years. Further it discusses the information needs of the Reserve Bank and the society and finally it redefines the role, responsibilities and organisation of DIT.

RBI must give its TAC more visibility - Dr.Y.V.Reddy

The Reserve Bank of India (RBI) has done well to make the minutes of its Technical Advisory Committee (TAC) on Monetary Policy public. The move, a first for the Bank, provides a small flavour of the complexities that go into framing monetary policy, even if does not dispel any of the mystery. On the contrary, the minutes are couched in such generalities that they give no inkling of the views of the members of the committee.  Take, for example, the following: ‘The committee expressed concerns about rising inflationary pressures, especially in emerging market economies (EMEs). Rising food prices in the international market, in particular, was a source of worry. Rising food and energy prices could emerge as a major problem in 2011.’ What is any reader to make of that? To be sure the TAC, quite unlike the Monetary Policy Committee (MPC) in the Bank of England, has only an advisory role. The governor is free to disregard it. As the former governor of the RBI, Dr Y V Reddy was fond of pointing out, in the Indian context, the buck stops with the governor.  That said, it is not the case that the TAC’s voice does not carry weight. All the more reason why the minutes should be more specific and better still, reveal the members’ preferences for or against a hike in interest rates, even if there is no formal system of voting as in the UK’s MPC. Since the minutes are released with a lag of a month, such disclosure is unlikely to do harm but would bring greater transparency and accountability.  It would also strengthen the RBI when it finds itself at odds with the government over monetary policy. Conflicts are inevitable in elected democracies where governments have a much shorter time-frame (usually till the next elections!) than central banks. It is, therefore, important to build institutional mechanisms to ring-fence monetary policy formulation from excessive political influence. Publication of the minutes of the meeting of experts on monetary policy is one such mechanism. The next stage would be to place a more detailed report in the public domain and finally, give the committee some teeth.

Budget offers RBI more leg-room on monetary policy front

Reserve Bank Deputy Governor Subir Gokarn welcomed the budget proposals to check fiscal deficit by keeping a tab on the subsidy bill, saying they are the right steps towards fiscal consolidation and offer the central bank more leg-room on monetary policy front. "We have been saying that the more extended the fiscal position the more pressure it puts on demand and therefore more difficult it is to manage inflation...these measures give us some comfort," he told newsmen at an official briefing on budget. The Budget today proposed to bring down fiscal deficit to 4.6% next fiscal from this year's 5.1%. The Budget also proposed to bring down net market borrowing of the Government by Rs 40,000 crore to Rs 3.43-lakh crore in FY12. The measures to tackle fiscal deficit would help as the monetary measures taken by the rbi tend to get nullified by the high fiscal deficit, he observed adding, "the more there is reigning-in, the more room there is for monetary policy to act." Liquidity would not be volatile next fiscal as there would be lesser government borrowing which coupled with no major cash outflow from the system, as had happened earlier this fiscal due to the spectrum auctions. Gokarn also called the Government''s articulation about the change in food consumption patterns to fruits and protein- rich food as a step in the right direction, as such items have been fuelling food inflation

FM offers Rs 100-crore fund for microlenders

Faced with an acute liquidity crunch, the Union Budget has brought little cheer to microfinance institutions (MFIs). However, MFIs have welcomed the recognition of their role in financial inclusion by Finance Minister Pranab Mukherjee. While announcing the creation of a Rs 100-crore “India Microfinance Equity Fund”, the finance minister hinted at a framework to protect the interest of small borrowers.  “The committee set up by the Reserve Bank of India to look into issues relating to the microfinance sector in India has submitted its report. The Government is considering putting in place appropriate framework to protect the interests of small borrowers,” said Mukherjee.  The Malegam committee has enhanced provision requirements for MFIs, entailing that Rs 5,000 crore to Rs 6,000 crore has to be provided by June or July for bad loans in Andhra Pradesh. “It is quite disappointing because the Rs 100-crore equity fund is nothing compared to what the sector has lost in Andhra Pradesh. The MFIs need to raise Rs 5,000 crore in the next six months (to meet the recommendation of the Malegam committee report,” said Vijay Mahajan, founder of Basix and chairman of MFIs’ representative body Microfinance Institutions Network. The MFI sector is reeling under the Andhra Pradesh MFI (Regulation of Money Lending) Act, which severely curbed operations of microfinance institutions in the state, putting restrictions on recovery. The state has the largest concentration of MFIs in the country. The Malegam panel had earlier suggested putting a cap on lending rates at 24 per cent and a loan amount of not more than Rs 25,000 crore to single borrower by MFIs. Mahajan said there was a need for proper legislation to stop state governments from enacting own laws on MFIs.

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