Govt must act on RBI to-do list

Time is running out for the economy to be put on the growth track: that is the leitmotif of the Reserve Bank of India’s annual report for 2010-11. It’s almost a cry from the heart from the apex bank to the government to get its act together and share the responsibility of taming inflation. The RBI is charged with running the country’s monetary policy and maintaining price stability while making sure there is a flow of credit to keep production and growth moving. It has gone more than three-fourths of the way to maintain price stability but inflation refuses to be cowed down and growth faces hurdles. The RBI had to reduce the GDP growth rate from 8.5 per cent to eight per cent. The government has yet to show that it will take steps to eliminate the supply-side constraints that are fuelling inflation. As the RBI annual report says, growth sustainability over the medium term depends on addressing the structural bottlenecks facing the economy. It spells out at length what needs to be done, namely tackling issues relating to education, health, energy, infrastructure and agricultural sectors. On the stubbornness of food inflation it says there is a need for higher storage capacity for grain, cold storage chains to manage supply-side shocks in perishable items, and augmentation of supply of non-cereal food items. Today the government throws up its hands saying that because a new section of the population is able to eat more there is a shortage in particular of protein foods like pulses, milk, chicken and eggs. The RBI has even set a precedent by spelling out in detail what needs to be done to improve agriculture and food management if the National Food Security Bill is to fulfil its objective of giving 35 kg of wheat and rice per month at `3 per kg to every BPL family. If the Centre implements all that the RBI has detailed, the level of growth could be boosted without fuelling inflation. If inflation is controlled, interest rates will fall and the investment cycle will get its adrenaline. Today investment, both in the government and private sector, has slowed down as India Inc. is finding funding expensive. The RBI also stresses the need to bring down fiscal deficit as this is preventing the government from investing in education and other social imperatives. To give just one example, one pink paper has revealed that there are one million vacancies in government and that one of the reasons is a lack of skilled people. So, as soon as the government gets over the Anna Hazare impasse, it should get down to tackling the supply-side situation with a big dose of political will and the RBI annual report as a to-do guideline. 

Deccan Chronicle

Banking Bill : Bank unions warn of flash strikes

The United Forum of Bank Unions (UFBU), an umbrella body of nine unions, warned of flash strikes if the government proceeds with the Banking Amendment Bill of 2011. The warning comes as the federation fears that the government is trying to rush through with the Banking Laws (Amendment) Bill of 2011 that seeks drastic changes in the existing laws. "We have written to the members of the Parliamentary standing committee on finance to look into the issues raised by us. We have also sought a meeting with them, but they have not given us any date so far," UFBU Convener CH Venkatachalam told PTI. "Since no positive response has come to us so far, we have decided to alert our units to get ready for a flash strike if the government proceeds with the Bill," he said. Stating that there is a concerted effort to push through the reforms on the part of the government, he said, "if the Bill is not taken up in this session, well and good. But, it appears that the government wants to somehow pass to bill in this session itself. They are not even willing to hear our views." The monsoon session will come to an end on September 8. "The government appears to be in a hurry to pass the Bill without discussions with the UFBU," he said.

Moneycontrol

Mobile payment services are a boon to the unbanked rural population

The market got a boost when the National Payments Corporation, set up by the Reserve Bank, slashed its interchange fee to 10 paise a transaction from 25 paise. The reduced charges will make mobile payments viable for even low-value transactions and encourage banks to increase the usage.......

Read...... 

Indian Bank wins "Best Risk Master Award"

Shri T M Bhasin, Chairman & Managing Director, Indian Bank received "Best Risk Master Award" from the august hands of Shri Prithviraj Chavan, Hon’ble Chief Minister of Maharashtra, in FICCI – IBA, Conference FIBAC 2011 in Public Sector Bank Category. The FIBAC 2011 Award is a much sought after and fought for Award, which has been finalized by a jury headed by Mrs Shyamala Gopinath, Former Deputy Governor, RBI. The evaluation was done, based on complex parametes and statistical evaluation matrix prepared by Boston Consultancy Group (BCG). Indian Bank has been rated as the Best Risk Master, Public Sector Bank in Loan Appraisal Standards, Loan Portfolio Management, NPAs and Restructured Loan Book Management and having Highest Earning on Assets. Talking to the media, Shri Bhasin said that Indian Bank stands at RANK 1, with highest Return on Assets at 1.53% and Loan Provision Coverage Ratio of 84.14% among all Public Sector Banks, as on 31.3.2011. Indian Bank is also having one among the lowest Gross NPAs at 0.98% and Net NPAs at 0.51% as on 30.6.2011.

http://www.4-traders.com/

All that glitters is not gold —Sonali Ranade

The Reserve Bank of India (RBI) needs to begin with the recognition that a substantial part of the demand for gold results from its policy of subsidising borrowers at the expense of lenders...

Read........... 

RBI warns of hard landing for economy on price worry

The Reserve Bank of India has said that the Indian economy could stare at a hard landing if global financial conditions worsen and food and non-food commodity price inflation remain high. Hard landing of an economy means a sharp growth slowdown in the Indian context. In the annual reportreleased on Thursday evening, the central bank says the “high and persistent inflation over the last two years” has shown the limitations of it efforts to contain inflation in the “absence of adequate supply response.” But even so, the RBI feels it must continue to tighten money to douse inflationary expectations. But in doing so, it could slow down the economy further, which can “eventually lead to a hard landing, which may impose large costs of disinflation. The report highlights the assessment of the fiscal year gone by (2010-11) and the challenges ahead for the economy. “From the demand side, moderation is expected as investment may remain soft in the near term, while private consumption may decelerate,” the central bank notes. The RBI has asked the government to enhance public investments in areas like infrastructure and reduce government expenditure.

Here are some key takeaways:

* RBI wants the government to implement the Direct Tax Code and Goods and Services Tax (GST) without any further delay for a more enduring fiscal consolidation strategy that focuses on expenditure compression by restraining subsidies.

* The Indian economy needs to brace itself for a difficult year from a macroeconomic perspective. With weak supply response, inflation remains an important macroeconomic challenge. Consumption demand has been strong so far, though private consumption may decelerate in the months ahead in response to the impact of higher interest rates. However, it is important to shore up investment from the point of view of sustaining high growth over the medium term.

* The RBI says the S&P downgrade of US sovereign rating had come at a time when there were increasing signs of growth slowing down in the major advanced economies. The likely impact of these developments on the Indian economy, going forward, will depend upon the effect it will have on trade, capital flows and global commodity prices.

* Inflation is likely to remain high and moderate only towards the latter part of the year to about 7 percent by March 2012. With global growth environment deteriorating, global commodity prices, including crude oil, have weakened since the fourth week of July 2011. On a year-on-year basis, inflation may remain stubborn in the near term and start falling some time in the third quarter of 2011-12. Incomplete pass through of high global commodity prices and persistence of high inflation expectations amidst continuing food price pressures may keep inflation elevated in near term. If global oil prices stay at current level, a further increase in prices of administered oil products will become necessary to contain subsidies. Fertiliser and electricity prices will also require an upward revision in view of sharp rise in input costs.

* The RBI believes that the interest rate differential between development markets and India could attract capital flows to the debt market in India. At the same time, foreign direct investment (FDI) is also likely to remain strong.

Firstpost

Workshop on public software

Members of non-governmental organisations from across the city met at a workshop in Bangalore on Friday, conducted by the Public Software Centre, IT for Change, to discuss why it was ethically necessary for public institutions to adopt public software.  They also learnt practical steps to install, learn and use public software applications such as Ubuntu GNU/Linux operating system, LibreOffice office suite, Thunderbird email client, etc. Kuldeep, from Public Affairs Centre, said, “The workshop showed how software is not merely a technology issue, but as an important resource for serving public interest, it has a huge socio-political impact. We see public software as a strong pillar of our own work in promoting public interests through publicly owned digital resources, ensuring equity in software use. Only public software supports universal access and community participation; proprietary software deprives us of our rights.”

FRSGlobal, part of Wolters Kluwer Financial Services, a global compliance and risk management solutions provider, announced that the Indian arms of two major global banks have opted for its regulatory reporting solution in order to help them meet the Reserve Bank of India's (RBI) requirements for automated reporting. “The RBI has clearly outlined the steps banks in India need to follow in order to submit accurate and timely data without manual intervention,” said Prabhat Gupta, country manager at Wolters Kluwer Financial Services in India. “In order to fully automate the process for submission of returns, firms need an end-to-end solution in place that acquires, integrates, converts and submits relevant data directly to the regulator.”

HBL

Monetary tightening

The mid-term monetary policy review is scheduled for the middle of next month. As the inflation rate is persisting at high levels, there is a fair chance of the Reserve Bank of India (RBI) continuing to maintain a tough stance against inflation, and hike the interest rates further by 25 to 50 basis points. However, the RBI can also hold back in case the global conditions deteriorate further in the coming weeks. Analysts advice investors and borrowers to remain prepared for a 25 basis points hike in the interest rates during the coming mid-term monetary policy review.

ET

Teaser loans are back

... the fiercely competitive environment, once again the leading players may declare war by offering similar ‘teaser loans'.  It is high time the regulators, both RBI and NHB, intervened and put a stop to these unhealthy practices. Before that, if the lenders can collectively decide to keep away from such bad moves, it would be highly appreciable and such a move will be beneficial for the entire financial system of the country.....

Read..........................