RBI goes back to school, digs deep into research & training

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Usha Thorat, head of RBI’s recently set Centre for Advanced Financial Research and Learning says that while most countries come armed with financial research on the G20 summits, India clearly lags behind. “There is a real dearth of research in the financial sector issues,” says Thorat. The new section of the central bank is set to create a “global hub for both research and learning in banking and finance.”

Thorat, who also heads the NBFC rules committee, discloses that the report that will be submitted by the end of June is likely to manage regulatory arbitrage and regulatory overlaps.

Below is a verbatim transcript of Usha Thorat’s interview with CNBC-TV18.

Q: What is the term of reference of this institution? What are you planning to achieve?

A: Let’s look at the name itself - the Centre for Advanced Financial Research and Learning - so it is really expected to become global hub for both research and learning in banking and finance, which is the broad objective of this center.

Q: What you do? You hold training courses for bankers? What is your core strength? Will you be having researchers? Will you be having teachers, will you be having bankers?

A: Basically, we are looking at is the two basic activities — research and learning. When we look at research, we want to do high quality research. However the research needs be useful to bankers, regulators, supervisors, policy makers and governments, hence, needs to have applicability. In general, the financial sector is under researched in India. The kind of data that you need in a manipulable form is not available. There is a certain amount of lack of research and this reflects in all our participation in the global forum. When you are going on to the G20 or you are going to the Financial Stability Board or the Basel Committee, most of the countries come with research backing them. There is a real dearth of research in the financial sector issues.

Q: Coming to the more operable part, you have to have Basel II, Basel III norms. Will you be training RBI staff itself into outdoor?

A: It will encompass both research and learning. We would have a set of programmes for training RBI staff and the banks own management as also the banks; we are not planning to go down in the bank, as long as we sensitize the top and senior management to the needs of risk management and Basel III.

Hence, we are focusing initially on financial risk management, financial regulation, and financial markets as the areas of priority. We will be holding programmes for senior management of the banks and courses may be for our own people to be able to move over to more advanced methods under the Basel II and Basel III

Q: You are also still one foot in the RBI in terms of heading the NBFC rules committee. Are you all close to submitting report?

A: We are close to submitting our report by end of June as the governor stated in his monitory policy statement. It has been wide range of issues that have been referred to us and we have had the benefit of traction with the market participants as well. It is quite a challenging task and it is quite complicated as well, because essentially the focus is firstly why do you regulate? How do you regulate and supervise and not miss things out and how do you not spend too much time on what you really don’t need to be doing? So, it is a kind of ensuring that supervisory resources are optimized. At the same time, you don’t want to be doing things you need not be doing.

Q: Will the term of reference or will the end result be that you have to come to terms with the fact that NBFCs you can’t manage with light touch regulation anymore, there will be more heavy regulation?

A: It has to be in the context of what has been the experience. It has got to do what is the international experience; it also has to deal with regulatory arbitrage and regulatory overlaps. Hence, we need to be able to handle all of this while looking at the eventual outcome.

Moneycontrol

Banks fail in agriculture funding, rue State officials

Bhubaneswar: State Development Commissioner (DC) and Agriculture Production Commissioner (APC) Rabi Narayan Senapati expressed his concern over the bankers’ reluctance to provide loans to agriculture and allied sectors. He was addressing the State Level Bankers’ Committee (SLBC) here on Thursday. Senapati revealed that banks as a whole have lent Rs 6,752 crore against the target of Rs 9,166 crore for the agriculture sector. This year, an ambitious target of Rs 12,924 crore has been set for the banks for funding the primary sector of the State, he said.  Principal Secretary of Finance JK Mohapatra and Principal Secretary of Agriculture RL Jamuda echoed the concern of Senapati. Commissioner-cum-Secretary of Fisheries and Animal Resources Development Satyabrat Sahu came down heavily on the erring bankers, who are just not providing enough loans to the sector.  Gauging the mood of the top bureaucrats, SLBC Chairman and UCO Bank Executive Director Ajai Kumar said the banks in Odisha have to finance more and more to the agriculture sector to enhance the income of farmers. Robust institutional credit would increase agriculture production and productivity, which in its turn would boost the State’s economy, he said.  Expressing concern over the fact that a large number of applications under pisciculture and horticulture are pending with different bank branches, Kumar said steps should be taken for their disposal without further delay. The banks’ proactive role in providing finance to farmers would help them come out of the clutches of the private moneylenders, he said. He, however, observed that the State Annual Credit Plan of Rs 25,233 crore for the year 2011-12 "is a very high amount." Under the Annual Credit Plan 2010-11, the achievement of banks in all sectors was 97 per cent. The percentage of priority sector advances to total advances is 57.54 per cent against the national parameter of 40 per cent.  However, the credit target for the current fiscal is on the higher side, he added.  Kumar emphasised that the banks should increase their CD ratio to meet the target. Even though the present CD ratio of the banks as a whole in the State is 65 per cent, some of the banks have not achieved the CD ratio of the national parameter of 60 per cent, he pointed out.  On the Financial Inclusion Plan, he said all the 1,878 villages with more than 2,000-population would be covered under banking facilities by March 2012.  Kumar also said that the banks should give more stress on financing to the MSME sector for the development of the State. Kumar said the banksm which have been selected to open RSETIs (Rural Self Employment Training Institutes) in their respective lead districts, should set up them without further delay.  Among others, RBI Regional Director B.K.Bhoi, NABARD Chief General Manager MK Mudgal, SBI Chief General Manager CH Narasimha Rao and UCO Bank General Manager and SLBC convener SK Dey Purkayastha were present at the meeting. Many bankers expressed their concern overthe poor recovery performance, particularly under the Government-sponsored schemes.

Pioneer

India Inc gets more room to invest abroad

Overseas direct investment rules for Indian companies were substantially relaxed by the Reserve Bank of India (RBI) on Friday, cutting by half the financial commitment for companies when they provide guarantees for projects on behalf of their overseas subsidiaries or joint ventures. The RBI has also allowed them more leeway to restructure the balance sheets of these entities. As more Indian overseas ventures compete to bag projects abroad, their parent companies were finding it more difficult to provide a 100% performance guarantee for each project. The cost of such guarantees were crimping the balance sheets of the Indian companies. Instead of the 100% performance guarantees issued to or on behalf of the JV or the wholly–owned subsidiary (WOS) that was taken into consideration while arriving at the financial commitment, it has now been lowered to 50%. “Considering the risks associated with such guarantees vis- à -vis financial guarantees, it has been decided that only 50% of the amount of the performance guarantees may be reckoned for the purpose of computing financial commitment to its JV, WOS overseas, within 400% of the net worth of the Indian party as on the date of the last audited balance sheet, ” the RBI said in a notification.

IE

PM hopeful of 8.5 per cent growth in current fiscal

Disagreeing with the Reserve Bank, Indian Prime Minister Manmohan Singh on Saturday expressed optimism that India will be able to achieve 8.5 per cent growth during the current fiscal despite concerns over high oil prices. "As of now I have not seen any sign that we should change our view with regard to our ability to sustain a growth rate of 8.5 per cent... I am confident that we will be able to sustain a growth rate of 8.5 per cent this year", he told reporters who accompanied him on his visit to Africa. The Reserve Bank of India, country''s central bank, in its annual credit policy had pegged the growth for the current fiscal at 8 per cent, down from 8.6 per cent recorded during 2010-11. Referring to agriculture situation and its impact on inflation, Singh said, "Whatever evidence we have, we expect a normal monsoon. And if the monsoon is normal, it will strengthen our ability to control food inflation". The headline inflation was 8.66 per cent in April, much higher than the Reserve Bank''s comfort level of 5-6 per cent. On oil prices, Singh said, "There are problems with regards to the burden of oil subsidies. They have to be tackled and all these issues will be claiming our attention in weeks and months to come". Although the oil marketing companies have raised the petrol rates in view of spiralling prices in the international market, the government is yet to take a view on diesel prices. A decision on raising diesel price is likely to be taken by the Empowered Group of Minister (EGOM) headed by Finance Minister Pranab Mukherjee in the second week of June. India imports about 75 per cent of its total crude oil requirement.

MSN

Growth and Finance

IN THIS BOOK, TOP EXPERTS, POLICMAKERS AND ECONOMISTS OFFER THEIR ASSESSMENTS OF INDIA'S PERFORMANCE IN THE AREA OF ECONOMIC AND FINANCIAL REFORMS AND ANALSE THE CONTINUED CHALLENGES

 P. P. Ramachandran : The book under review is a festschrift in honour of Dr. C. Rangarajan.

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Singapore bank freezes all accounts of Speak Asia

Raipur: All accounts of survey and research company, Speak Asia, have been closed by the Singapore-based United Overseas Bank in India and Singapore. The multi-level marketing company is facing serious allegations of fraud.  This development will lead thousands of members in Chhattisgarh and 19 lakh in India to bear huge losses.  The AGM of Reserve Bank of India, R Maheshwari, has made it clear that Speak Asia has not been granted permission to carry out its operations in India.  All the offices of the company in the city, including the main office in Katoratalab, have been closed. Several members of the company have filed written complaint with IG Mukesh Gupta and SSP Dipanshu Kabra against Speak Asia.  The investors have said that after the closure of company’s account the payment has been stopped and they are not receiving the SMS from Speak Asia which they used to get earlier. Over 50 thousand people from Raipur, Bhilai, Durg, Rajnandgaon, Bilaspur, Jagdalpur and several other districts had invested Rs 150 crore in Speak Asia. Speak Asia is the company where consumers pay around Rs 11,000 for a membership which will allow them to conduct some surveys online for the firm. The members also get paid for filling those surveys. It is believed that the Rs 11,000 investment could be recovered within three months.

Daily Bhaskar