March 11: Reserve Bank of India has reported that they had recently undertaken quick scrutiny in some banks to examine if the reasons for corruption could be attributed to systemic issues i.e. risk to the system independent of the bribery case and if absence of proper internal controls had provided opportunities for bribery. Further acting upon the press reports that appeared in November, 2010 regarding arrest of CEO, LIC Housing Finance Ltd. and some other persons in connection with allegation of receiving illegal gratification by senior officers of some Public Sector Banks and Financial Institutions for sanctioning loans, RBI undertook scrutiny of borrowal accounts of the groups at Punjab National Bank, Central Bank of India and Bank of India, which were stated to be under scanner of CBI. The outcome of the preliminary scrutiny did not reveal any systemic risk and lacuna in the loan sanctioning system and the relevant internal control system of serious nature requiring immediate specific supervisory or regulatory interventions. This information was given by the Minister of State for Finance, Shri Namo Narain Meena in written reply to a question raised in Lok Sabha today. Press Information Bureau
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Monday, March 14, 2011
Chaudhuri May Lead India’s Largest Bank as Rival ICICI Expands
State Bank of India, the nation’s biggest lender, is poised to name 36-year veteran Pratip Chaudhuri as chairman as competition from rivals including ICICI Bank Ltd. intensifies. Deputy Managing Director Chaudhuri, 57, was the only person recommended to a cabinet committee tasked with selecting the head of the state-controlled bank, a finance ministry official said on March 11, declining to be identified before an official announcement. Chaudhuri didn’t return three telephone calls to his office in Mumbai. Chaudhuri’s task of boosting shareholder returns at the 205-year-old lender may be hampered by state control that gives private-sector rivals an edge in mobile and Internet banking. Bloomberg.com
Rate hikes loom despite sub-8% growth concern
Even as it is becoming increasingly possible that the economy may clock sub-8% GDP growth in 2011-12, the Reserve Bank of India (RBI) has little choice but to increase policy rates when it meets later this week. With inflation averaging 8% and expected to come down just a tad lower at 7.8% in February from 8.2% in January, the rise in prices is way above the central bank's revised projection of 7% for March 2011. As such, key policy rates are tipped to be hiked by 25 basis points each taking the repo rate to 6.75% and the reverse repo to 5.75%, in what would be the eighth increase in a year. Earlier this month, China upped its benchmark one-year lending rate to 6.06, the third increase since mid-October after growth accelerated and inflation stayed above 4% for a third month. With crude oil prices have risen nearly 20% in the last three weeks in the wake of the unrest in West Asia, South, Korea, Thailand and Vietnam have all raised borrowing costs this month. Fund managers, however, believe central banks in many of the emerging economies are behind the curve in terms of taming inflation and more than $20 billion has moved out of emerging market funds since the start of the year. According to Bank of America-Merrill Lynch, the central bank could tighten money by 75 basis points through the year. Indeed, while a high base effect will help cushion the wholesale inflation number till July, 2011, average inflation for 2011-12 is likely to be fairly high at 6.57%.Core non-food inflation is tipped to remain sticky at 5%, higher coal prices will add to costs while the government may choose to pass on the higher prices of crude oil through a hike in diesel prices. Monetary transmission couldcontinuetobeasswift as it has been the case in the last couple of months -banks have raised loan rates by at least 50 basis points between early December and now in two tranches. As such, loan rates could climb further. Demand for non-food credit has been growing at just over 20% year-on-year since October, 2010 and given that deposits continue to grow at a far slower pace of 16%, RBI would continue to keep credit growth on a leash so that liquidity remains sufficient. With the gov ernment announcing in its Budget statement that it will borrow a net amount of just R3.4 lakh crore in 201112, the bond markets have rallied smartly; yields on the benchmark bond are ruling at around 8%. However, yields could spike if borrowings overshoot the target. Financial Express
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