Down the memory lane



Looking back:

V.Satyavathi with daughter Ratnamala Nori at their residence in Durgabai Deshmukh Colony



Eighty eight years old V. Satyavathi has never worn anything that is not made from the loom. This advocate of khadi can still spin the charka with verve. Sitting in the backyard of her house in Durgabai Deshmukh Colony, a few yards away from Durgabai's “Rachana” she recollects her association with the social reformer on whose behest she and her husband V.N. Murti came to Hyderabad and settled down in the same locality.  The locality was later named after Durgabai whose birth anniversary was celebrated on July 15. “My husband and Durgabai studied in Andhra University. She was studying law then.

It was again in Mumbai that we connected when my husband was working as Director of Economics and Statistics in RBI and C.D. Deshmukh was the Finance Minister. His younger brother worked in the Reserve Bank and stayed in the RBI building in Colaba as we did. We in fact threw a party for Durgabai and C.D. Deshmukh on their wedding,” she recollects about the reception that was attended by Burra Venkatappaiah, N.G.K. Murthy and others. It was probably the Andhra connect that brought the Murtis and Deshmukhs together, says Satyavathi, hailing from Kakaraparru village in West Godavari. “Durgabai used to sell khadi clothes door-to-door in Rajahmundry as a member of INC. She had Pattabhi Seetaramaiah and Bulusu Sambamurthy as mentors. Even in Mumbai she would come and give talks at the ladies club in the bank quarters on emancipation of women in the villages. She spoke very well. I visited the Andhra Mahila Sabha she first started in Chennai.  They worked towards development of women, conducted debates and taught Hindi,” adds Satyavathi who in fact learned Hindi at the AMS, Chennai then. V. N. Murti was the chairman of the Literary House that was started at the Andhra Mahila Sabha in Hyderabad later. As a State Resource Centre for adult education it did yeomen service publishing text books and later using puppetry as a medium for spreading the literacy message. “We were sent to Lucknow to learn the art from Welthy Fisher,” recollects Ratnamala Nori, daughter of V.N. Murti. Equipped with a story board with themes such as thrift and women's education, puppets and a van, Ratnamala toured various villages.  Her programmes such as ‘Illali Chaduvu Intiki Velugu' were also aired on Doordarshan. Today Nori Art and Puppetry Centre holds many memories. A potted Bangkok rose, a favourite of CD Deshmukh, still blossoms here. “C.D. Deshmukh gifted the plant to my father. They were close friends,” she says with nostalgia as she pours through the autographed book of Deshmukh. “He was a shattered man when Durgabai died. He would stroll over often and one could see the void he felt,” says Satyavathi, probably one of the few persons who knew the eminent family from the State at virtually close quarters.

HBL 

Banking on Bharat



“At one end of the spectrum lies the demand to achieve financial inclusion because nearly 50% of the country’s population is yet to be covered under the formal system of banking and at the other end lies the task to fulfill the needs of the existing customer.”



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Cops nab cash-filled car after long chase



Sahibrao Nalawade (right) and Kiran Phalke



Swift Dzire with Rs 20 lakh in Rs 10 denomination notes intercepted in Kalyan; three men detained

A car full of cash headed towards Navi Mumbai from Nashik. A man who claimed he was an officer of the Reserve Bank of India. A story about where the cash came from and where it was being taken that did not wash with the cops. The Kalyan police on Saturday were left grappling with a mysterious case after they intercepted a car in which three men were transporting Rs 20 lakh in Rs 10 denomination notes. The cargo was so heavy -- Rs 20 lakh in Rs 10s is 200,000 notes -- that the car's rear was tipping. The car was intercepted after a 45-minute chase, just as it was entering Dombivli. The three men detained have been identified as -- Sahibrao Nalawade, who claimed to be an RBI employee; Ganesh Phalke, who was driving the car; and Kiran Phalke, his brother, who was in the rear seat with a travel bag full of cash in his lap. The cash was in eight bags -- four in the car's cabin and the rest in the boot.  At the time of going to the press, the cops had been told two stories and they were not buying both. Nalawade told the cops that he had nothing to do with the cash or the other two in car and that he had taken a lift. However, cops said he had tried to jump out of the car and escape just minutes before it was intercepted. Also, they found an RBI officer landing in a car full of cash too much of a coincident. The other two occupants of the car said the money was withdrawn from a Bank of India branch in Nashik and that it was being taken to Sanpada in Navi Mumbai to be distributed to big restaurants and malls that require large amounts of small change. They said they did this for a small commission. It being a weekend, the cops found it difficult to get through to Bank of India branch in Nashik to cross-check the brothers' claim.

When Mumbai Mirror contacted RBI spokesperson, Alpana Killawala, she said: "I cannot comment off hand without knowing facts. I will find out on Monday and let you know."  Assistant Commissioner of Police DS Thakur received a tip-off at 1 pm about a blue Maruti Swift Dezire laden with cash entering Kalyan. The message was relayed through control room to all police stations and at least five team scrambled to chase the suspect car. Around 1.45 pm the car was spotted near Durgadi Fort by one of the teams. "I saw the car first at Shivaji Chowk. As soon as I saw the car, I knew it was the one we were tipped off about. Its boot was almost touching the road and I could see two men in the rear seat," said ACP Thakur. The car had now picked up speed and the cops were finding it difficult to catch up with it. However, thanks to bad roads they managed to intercept the car on the Kalyan-Dombivli border. "Just before the car was intercepted, one of its occupants (later identified as Nalawade) jumped out and tried to escape. However, one of my teams caught him," said ACP Thakur. The car, the money and the three suspects were first taken to the Manpada police station, but the case was later transferred to the Bazarpeth police. ACP Thakur said they will be looking at three angles in the case. "First we want to check if the cash is genuine currency notes. Second, since they came from Nashik, where a security press is located, we want to check if freshly minted notes were pilfered out. Third, of course, is what were they going to do with all this cash," he added.

Mumbai Mirror 

Fai, fake notes, terror: Pak’s multi-pronged war on India

A whole section of the Pakistani establishment seems to be revolving around and thriving on a single-point agenda: destabilise India. The Ghulam Nabi Fai episode now and the Tahawwur Rana-David Coleman Headley affair a couple of months earlier have already exposed the extent and intensity of the engagement of powerful state forces with the anti-India terror elements. It now comes to light that the racket involving the printing of fake Indian currency is not the handiwork of some lone isolated outlaw or a group of such characters backed by rogue officials of the ISI. The link leads straight up to the state-owned mint in Pakistan. According to a report in DNA, sources in the National Investigative Agency (NIA) have revealed that the fake currency notes circulated in India to sponsor terror agents and destabilise the economy are manufactured in the same state facility where Pakistani currency notes are also printed. The expert committee, which compared genuine Pakistani notes with the fake Indian ones, has found startling similarities. The initial report of the committee says that the dry offset printing method was used to manufacture both; the PH value found on fake Indian currency notes of the denomination of 500 and 1,000 was exactly the same as in the Pakistani notes; and the grammage – the grams per square metre of paper, an indicator of the nature of the paper used – was identical too. The last one and the presence of poly vinyl alcohol on the surface of the papers used, make it clear that the paper for both types of currency notes came from the same source, the report says. The committee concludes that the quality, scale and other technical values make it clear that both sets of currency notes could be manufactured by machines owned by a country only. The Pakistani origin of the fake notes doesn’t surprise anyone. Such notes have been in circulation in India for a long time now and conduits are picked up by intelligence and law enforcing agencies on a regular basis all over the country. The CBI and other agencies are right now probing how the terror outfits on the other side of the border lay their hands on the security features of the secret templates for Rs 500 and Rs 1,000 notes. Investigators link the theft to the ISI’s desperation to make the fake currency notes look authentic. The earlier notes, though cost effective, were detected easily. After getting hold of the template, the manufacturers have also shifted to imported paper for printing from the wood pulp-based paper earlier used. The ISI’s dogged efforts at counterfeiting have made the fakes hardly distinguishable from the original. The threads, the watermarks, the Ashoka Pillar, Mahatma Gandhi’s image, the denomination and the RBI mark in the new bunch of notes are sharp and nearly as good as in the original India notes. The investigators have been hinting for sometime that the operation has been moved to government presses in Quetta, Lahore and Peshawar to achieve more sophistication. The final product is then routed from the presses into India through conduits in Nepal, Bangladesh and Sri Lanka. The NIA expert committee’s revelation only confirms the suspicion. What is surprising here is the scale of the conspiracy against India and it multi-prongedness. At one level Pakistan is spending an enormous amount of energy to influence intellectuals across the globe against India — the Fai episode makes it evident — and at another level it is directly unleashing forces such as terror outfits and the counterfeiting racket to weaken us. There could be many other undetected fronts too. If only the country spent that much energy in putting its house in order. But since Pakistan seems so keen to print Indian currency, maybe as a confidence-building measure we can hand out the contract to the Quetta mint. This way the RBI saves the cost of printing the notes, and the Pakistanis can send us the money through the Samjhauta Express instead of low-level couriers.

First Post

Balancing helped us to avoid instability: Y.V. Reddy

The importance of ethics in all walks of life, common sense and the precedence of intuitive understanding over technical mastery are among the key lessons from the global financial crisis, Y. Venugopal Reddy, former Governor of the Reserve Bank of India said on Friday. Delivering the 48^th convocation address at the IIT  Madras, Mr. Reddy said the main reason why India was only marginally affected by the crisis was the importance given here to a “balance between several factors.” While the policy view in the US was that asset bubbles being difficult to define are best managed after a burst, the Indian approach is different and concerned with distributing “gains and pains” among the people if the bubble builds up and bursts, Mr. Reddy said. Putting restraints on banks extending credits or investing in housing or equity markets was the Indian way of ensuring that innocent victims were not victims of an asset bubble burst, according to Mr. Reddy, who is currently Professor Emeritus, University of Hyderabad.  “The balancing helped us to avoid financial instability and record the highest growth rates with price stability,” he said. Mr. Reddy recalled that once when asked how the RBI intervened in foreign exchange markets without basis for knowing in advance the right forex rate, he had stated: “I cannot define God. That does not mean that I cannot identify the devil…” According to him, the financial crisis also brought into focus severe weaknesses in current economic thinking and demonstrated how some learned policy makers and leaders in financial markets were lacking in intuitive understanding of the world.  “Many of them had impressive technical understanding, but in their role as leaders, they needed intuitive understanding,” he said. Mr. Reddy stressed the need to have good values on a continuing basis that determine relative weights to competing considerations, especially, between personal welfare and public interest. Citing an anecdote about a Lieutenant in the French Army being told by his General that at his level there was no difference between tactics and strategy, Mr. Reddy said the take-away lesson was that as one shoulders higher responsibilities, one needed to go beyond measurables in decision-making. Mr. Reddy told the graduands to get ready for an exciting future when India would offer plenty of attractive opportunities and surpass China as the nation that creates maximum wealth. The IIT-ian would also be the best equipped to deal with the challenge of multiple transitions ahead, he said. M.S. Ananth, IIT-M Director and chairman of the Senate, presented a report highlighting the academic, co-curricular and socially relevant activities undertaken by the IIT over the past year.  He later presented degrees to 1,385 candidates, including 245 in absentia. M.M. Sharma, Chairman, Board of Governors, urged students to consider a career in the academic world that held many rewards as the economic prosperity of a nation hinged on the output of doctorates per million of population. “We in the academia have the spiritual freedom to pursue blue sky research, innovate and yet not be affected by oppressive corporate and management pressures,” he said.

HBL  

Policy pressure on portfolio

The successive increases in policy rates by the Reserve Bank of India have necessitated changes in investors’ portfolios. Some ideas on how one should go about those. The policy measures of the Reserve Bank of India (RBI), the country’s apex bank, are watched with a lot of interest. These are among the most significant drivers of the economy and financial markets. RBI is in charge of the monetary policy, which has a great impact on liquidity conditions and interest rates. The Bank has been entrusted with managing liquidity and inflation in the country. The investing class, therefore, needs to understand the basics of monetary policy and how it impacts investment. RBI has several tools in its hands to release or control liquidity in the system. Two of the most important tools are the cash reserve ratio (CRR) and the liquidity adjustment facility (LAF). CRR is the proportion of their deposits that banks have to keep with RBI. Raising CRR is one of the most effective ways for the RBI to suck liquidity out of the financial system, reducing demand in the economy and, thereby, helping curb inflation.LAF is a mechanism through which RBI lends to and borrows from banks for very short periods, typically just a day. The repo rate is RBI’s lending rate and the reverse repo rate is RBI’s borrowing rate. These two rates help RBI influence short-term interest rates in the rest of the financial system. When RBI increases these rates, the banks also increase deposit and lending rates. The effect of increase in policy rates is that the banks increase deposit rates and lending rates. Rising interest rates are adverse news for the stock markets. The high cost of capital directly affects the performance of companies in rate-sensitive sectors. For example, banks may not be able to pass on the entire increase in cost of funds to their customers, thereby affecting net interest income. Higher loan rates may force individuals to postpone purchases of homes, vehicles, consumer durables, etc, and thereby bring down the overall demand for loans affecting banks and supplier companies such as real estate, auto, infrastructure, etc. Most businesses need capital to run their day-to-day operations that require a mixture of debt and equity. Companies with huge debt on their balance sheets and those needing greater funds in the form of debt for expansion are worse affected. For, when interest rates rise, so does the cost of borrowing. Higher rates also increase the interest cost burden of indebted companies and thereby bring their profits down. With inflation becoming a major issue, interest rates can only go up. So, investors should avoid rate-sensitive sectors like financial services, real estate (and, to some extent, automobiles) at least for some time. Cash-rich companies sit pretty during these times. They don’t have to borrow capital and can earn from short-term investments of the cash in their hoard. The benefit they earn on the treasury income won’t be substantial. But cash becomes handy now because they can fund their growth without resorting to high-cost debt. Companies with surplus cash are able to benefit by way of higher yield on investments. Sectors such as pharmaceuticals, fast-moving consumer goods and information technology are considered non-interest rate sensitive by investors and are safe to park money during a high-rate regime. This is because you can postpone buying a house, but you cannot postpone buying day to day things like biscuits, cosmetics, detergents, toothpaste, etc, which are a daily necessity or medicines. It is the rate at which RBI borrows from banks. RBI increased the reverse repo rates by 200 basis points in less than a year’s time. The table above gives the return for one year for the CNX NIFTY and various sector indices. As seen in the table, due to increasing interest rates, the NIFTY has given nominal returns. However, sectors such as pharma and FMCG have better returns. The auto segment has given the best returns but it was primarily because of hammering last year. As far as individual stocks are concerned in Nifty, those that have given greater than 25 per cent returns are Sun Pharma (49 per cent), ITC (41 per cent), Hindustan Unilever (27 per cent). These stocks are from defensive sectors such as pharma and FMCG. The worst performers have been realty sector stocks such as DLF (minus 24 per cent), Unitech (minus 58 per cent), IDFC (minus 27 per cent), Maruti(minus 15 per cent), etc. With the impact of all the hikes yet to take place, investors may position their portfolio with less of interest rate-sensitive stocks. However, that should not make them completely disinvested from these stocks , as these may give bumper returns later. Having a proper balance of the stocks will help optimise returns.

BS

Yet another 25bps rate hike on July 26, says CNBC-TV18 poll

Industrial production numbers were down to 5.6% in May; corporate results are showing telltale evidence of falling sales and margins. Falling margins indicate an inability of producers to pass on prices. And yet on the other hand inflation remains high at 9.4% and is set to go higher if producers pass on the fuel price hikes. The Reserve Bank of India (RBI) faces an ugly contradiction-slowing growth and rising inflation. So what's the market expecting it will do on July 26, in its credit policy? CNBC-TV18's Gopika Gopakumar and Vidhi Godiawala give a lowdown. RBI Governor is expected to continue his anti-inflationary stance in the first quarter monetary policy review on July 26. 85% of the respondents polled by CNBC-TV18 expect RBI to hike the repo rate by 25 basis points, 15% say the RBI will acknowledge slow growth and pause its tightening cycle and a small minority argue there is a case of a 50 bps repo rate hike.  Leif Eskesen, chief economist, ASEAN and India, HSBC, said, "We think there is a case for 50 bps in the next policy meeting but we do think the RBI will move by 25bps. They will also look at what's happening globally that will temper their degree of aggressiveness." While the July hike is expected by a high majority, opinion is divided on what thereafter. 55% of those polled expect RBI to hike the repo rate by another 25 basis points after the July 26 rate hike. 45% said they don't expect RBI to increase rates further in FY12.  Rana Kapoor, founder, managing director and chief executive officer, Yes Bank, said, "We are probably at a peak level in terms of interest rates. While there may be some correction and calibration in repo rates as the market is generally expecting, the damage on industrial production and industrial growth, on output and structural implications are severe now of any further interest rate hikes. We are probably at the very end of increasing cycle." Rate hikes will mean slower growth, but 75% of those polled expect RBI to retain its gross domestic product growth forecast at 8%, 25% see the central bank scaling down its growth forecast between 7.5-8%. As for inflation, 65% said RBI will leave its March end inflation forecast unchanged at 6%. 35% expect RBI to raise its inflation forecast above 6%. A majority (65%) doesn't expect banks to increase lending or deposit rates immediately if the RBI hikes the repo rate on July 26. 35% see banks passing on costs to their borrowers. Bankers will decide post the policy announcement and their decision will depend on their bank's cost of funds.  Arun Kaul, chairman and managing director of UCO Bank, said, "We'll have to wait and see how liquidity shapes up. If my cost of fund moves up I have no option but to pass it on to my customer." While, MV Nair, chairman and managing director of Union Bank, said sees no reason why deposit rates should be raised at this point. "When you have positive return to the depositors, the deposit growth is expected to be higher. So to that extent there is no need why it should take place. Whether to pass on to borrowers or not is a call that we may have to take post policy because it gets linked to the deposit costs," he explained. Majority of the economists and bankers say RBI's tone will continue to remain hawkish and inflation control will precede its policy stance. But there is a small group which believes the central bank will prepare the market for an exit from its tightening regime. This minority feels the regulator will give growth its importance, acknowledge global uncertainties and the possibilities of its negative spillover effects.

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Bank staff, officers to strike work on Aug 5

Around ten lakh employees from all nationalized government banks, domestic and international private banks, cooperative banks and regional rural banks will strike work on August 5. A release from The Maharashtra State Bank Employees Federation says that the strike is not for any financial demands but for pending demands of the employees. The federation - demands not to privatize public sector (nationalized) banks, not to reduce central government’s share capital in public sector banks, not to take World Bank loans for fulfilling capital requirements in public sector banks, opposes merger of five banks in the SBI group with SBI. The federation also says that it would not be in public interest to allow uncontrolled access to foreign capital in banking industry and has demands not to cancel Section 12 ( 2) of the Banking Regulation Act because of which foreign banks are bound to takeover the private banking sector.

FPJ

central bank policies to underpin shares

The Reserve Bank of India (RBI) has had a tough job on its hands, wielding monetary tools to slam down on inflation that was largely caused by supply bottlenecks. It is widely tipped to raise rates by a quarter of a percentage point this week, which would be its eleventh increase — the most by any central bank — in 16 months.......

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