Reuters
The very purpose of VITALINFO is to provide a platform for wider dissemination of updated information related to and happening of events in and around RBI.
Tuesday, September 20, 2011
India rate rise cycle near peak – Gokarn
Pension + Updation = Tension
Dear Mangesh,
Your 'VITALINFO' is really useful and I make it a point to read it daily. I wish to add a comment on the RBI Pension Updation Issue and did not know how to send this feed. Hence, I am sending this mail for you to incorporate it in the main body:
"The issue of Pension Upgradation in RBI has been pending for the last several years. The commendable efforts of the United Forum of Employees and the Retired Employees' Associations on the issue have not borne fruits except to the limited extent of stopping RBI from going back on the Upgradation up to a particular period granted by Dr.Bimal Jalan. Several retired employees have also used the RTI for eliciting information from the Government/RBI which would support the arguments adduced in favour of Upgradation. Several well informed and exhaustive letters have been written to the Bank and detailed arguments have been advanced before the Bombay High Court as to why the denial of Upgradation ,on the lines of Central Government pensioners, is not well founded. I have not been able find in the wealth of information argument/s of the Government for not acceeding to the request of the Bank. The only argument of the Government I have been able to cull out from the wealth of material is that the upgradation cannot be granted without an amendment of the relevant RBI Pension regulations and simply on the basis of administrative orders. Even this argument does not explain as to why the approval of the Government cannot be granted if the RBI sends an appropriate amendment of the pension Regulations in deference to the view of the Government (even if the legal department of the RBI does not consider it necessary). Would someone in the RBI fraternity, among whom the 'VITALINFO' is bound to be useful and popular and hence is received by a large number, enlighten me on the issue. Thanks in anticipation."
Mangesh, would you please let me have a line in acknowledgement of the mail? Thanks.
A.Chandramouliswaran, (Former Executive Director), Chennai
SBI DISBURSES LOANS TO WEAKER SECTIONS
As part of financial inclusion programme, State Bank of India (SBI), country’s largest public sector lender, today provided financial support to 4,500 beneficiaries from weaker sections of the society. The SBI disbursed loans in Delhi under the bank’s differential rate of interest, self help groups and debt swap schemes. The programme focused on broad base financial inclusion by providing banking facilities to the underprivileged sections of the society for their livelihood promotion. Under a catergory, Umar Mohammad, a labourer, has received a cheque of Rs 10,000. Those who attended the programme included Mr Praveen Kumar Tripathi, chief secretary, Delhi government; Mr A Krishna Kumar, Managing Director, SBI; Mr Chandan Sinha, Regional Director, Reserve Bank of India; Mr Sunil Pant, Chief General Manager, SBI (Delhi circle); Mr G R Chintala, General Manager, NABARD.
http://flashnewstoday.com/index.php/sbi-disburses-loans-to-weaker-sections/Efforts hard to ignore.............
Dear Mangesh,
I can hardly choose some words for your commendable efforts. Today’s news items have been posted at 4.30 in the morning, the time when most of us are deep into sleep, you are wide awake, sacrificing your comforts and preparing food for thought for us. It is said that there are some persons who work very hard and there are others who hardly work. I find myself in the second category, while people like you, who start their day at 4 in the morning for the benefit of others, are the one who take the country to the new highs. We salute your untiring contribution.
Mukesh Kumar
Assistant General Manager / MOF, CAB Pune
Listing within two years of getting banking licence will be a challenge: ICRA
The requirement to have a bank listed on the stock exchange within two years of receipt of the banking licence so that the promoter shareholding comes down to 40 per cent could be a challenge, credit rating agency ICRA said in a note on the draft RBI guidelines for new bank licences. The challenge emanates from the fact that it would take some time, post-receipt of licence, to commence banking operations while managing teething problems, and that capital market conditions prevailing at the time may not be conducive. “Some corporate entities may be deterred from applying for banking licences as some of the businesses may not be mature for listing on the stock exchanges,” said ICRA. Given the proposed restrictions on non-promoter shareholding, it will be difficult for the promoter to dilute its stake to 40 per cent within the first two years. Moreover, supervision of non-financial entities (owned by the same promoter) by the RBI may prove difficult, the note issued by ICRA said. Considering the larger issues of financial stability and a level-playing field for all players, ICRA said there may be a case for realignment of guidelines relating to capital market and real estate activities for the existing private banks and for the shareholding of existing promoters who continue to hold over 15 per cent in existing private banks. Further, realignment of guidelines will be required for the consolidation of operations of the existing groups that continue to operate via non-banking routes. On improving banking penetration, the rating agency said, given the more profitable nature of urban/metropolitan operations, the entry of new private banks is likely to intensify competition further in these areas. The requirement of having to open branches in under-banked areas could exert pressures on the profitability of the new banks in the short term even as the stipulation could bring in some improvement on the financial inclusion front, ICRA said. Referring to the stronger corporate governance structure envisaged in the draft guidelines, the agency said it would serve to further mitigate some of the concerns associated with the entry of corporate entities in the banking sector.
HBL
Draft RBI norms may deter cos from opening banks
Norms relating to the ownership and listing of new private banks, as proposed in the Reserve Bank of Indias (RBI) draft guidelines, may discourage some companies from applying for new banking licences, rating agency Icra said today. “The requirement to bring down promoter shareholding to 40 per cent and have the bank listed on the stock exchange within two years of receipt of the banking licence could be a challenge, given it would take some time after the receipt of a licence to commence banking operations while managing teething problems, and that capital market conditions prevailing at the time may not be conducive,” it said. The central bank, in its draft guidelines released last month, said promoters’ stakes in new banks through non-operative holding companies should be reduced to 40 per cent within two years. The stake should be further pared to 20 per cent in 10 years and 15 per cent in 12 years. RBI also said new banks should be listed on local bourses within two years of securing a licence. Icra said in order to provide a level playing field, the activities of the banks promoters in capital markets and the real estate sector need to be examined and aligned with the existing norms. The consolidation of operations of existing groups that operate through nonbanking routes also needs to be addressed, it said. According to the rating agency, the proposed guideline mandating one fourth of a new banks branches in rural areas may exert pressure on the profitability of these lenders in the short term. Icra said a higher capital adequacy ratio would serve as a cushion to depositors against volatilities faced by banks in the start-up phase. RBI has proposed the capital adequacy ratio for new banks at 12 per cent for at least three years, compared with the nine per cent requirement for existing banks.
BS
RBI fines Uma Cooperative Bank for violating KYC norms
The Reserve Bank has imposed a penalty of Rs 1 lakh on Vadodara-based Uma Cooperative Bank for non-adherence to regulatory norms. "RBI has imposed a monetary penalty of Rs one lakh on Uma Cooperative Bank Ltd, Vadodara (Gujarat), in exercise of powers vested in it for non-adherence to Know Your Customer (KYC) norms," the apex bank said in a statement. The Reserve Bank India (RBI) had earlier issued a showcause notice to the bank, in response to which the Cooperative Bank had submitted a written reply. "After considering the facts of the case and the bank's reply, as also personal submissions in the matter, the RBI came to the conclusion that the violations were substantiated and warranted imposition of the penalty," the RBI said. The RBI has penalised over 60 small banks so far this calendar year, for lapses in implementing customer identification norms and various other violations. The penalties ranged from Rs 1 lakh to Rs 5 lakh.
IE
RBI denies approval for HSBC-RBS deal
The RBI has refused to give its approval for the purchase of RBS India’s retail and commercial assets by HSBC. The regulator has questioned RBS as to why they are doing the deal at all. It is for HSBC and RBS to now satisfy the regulator, reports CNBC-TV18’s Gopika Gopakumar quoting sources. CNBC-TV18 learns that the HSBC-RBS deal was announced a year ago. However, this deal could be stalled now because the RBI is not convinced yet, and hence, it has denied approval for this deal. Sources say that the bank has questioned RBS on a necessity of this deal and as to how they will do priority sector lending once they sell-off all their retail and commercial operations to HSBC since foreign banks have to do 32% priority sector lending. Earlier, RBS was looking to sell around 31 branches with 1800 staff to HSBC. RBS tells CNBC-TV18 that they will continue to work closely with HSBC and the regulators to get approval. “We also look forward to completing the deal in a matter that satisfies regulatory requirements,” added the bank. On the other hand, HSBC has said that they will continue to engage with the regulator and await its approval. However, sources confirm that the RBI is clear on its front and the ball is now in the court of RBS and HSBC to negotiate and comeback to the regulator with a satisfactory explanation.
Moneycontrol
BoM likely to get Rs. 800 cr capital infusion in FY12
Post-capital infusion, the capital adequacy ratio of the bank is likely to go up to 14% from the present level of 13.35%
New Delhi: Pune-based public sector lender Bank of Maharashtra is hopeful of receiving Rs. 800 crore from the government as part of the capital infusion plan in the current fiscal. “We have approached the government for additional capital infusion of Rs. 800 crore. This is under process and we expect to get it before March, 2012,” Bank of Maharashtra CMD A S Bhattacharya told PTI here. Post-capital infusion, the capital adequacy ratio (CAR) of the bank is likely to go up to 14% from the present level of 13.35%, he added. The Reserve Bank of India (RBI) prescribes banks to have a CAR of 12% as part of its prudent risk management measures. Bhattacharya, however, noted that the bank had no plans to raise money through either through equity or bonds in the current financial year. In the meantime, government has said that a committee had been formed to look into the matter of recapitalisation of banks. At present, 6-7 public sector banks, including nation’s largest public sector lender State Bank of India (SBI), have approached the government for capital infusion in order to boost their capital adequacy ratio, which will help in further lending to customers. Also, implementations of Basel-III norms, which will start from 2013, require recapitalisation from the government. Secretary in the financial services department D K Mittal had earlier said that though this year budget for bank recapitalisation was Rs. 6,500 crore so far, there would be a second supplement in December to infuse further capital into selected public sector banks. Bank of Maharashtra, which has a government holding of close to 79.5%, has a total branch strength of 1,546 across the country. It has registered a 3% increase in net profit to Rs. 122 crore in the first quarter of the current fiscal. Its net interest income (NII) rose by 44% to Rs. 591.4 crore during this period. Mint
Time for RBI to pause, say economists
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“We, therefore, stick with our forecast for 8.25 per cent as the peak and for RBI to remain on hold in the balance of the year and early next year,”....
Growth vs Inflation - Too Dangerous to Pause Now
The RBI rate hike last week set the cat among the pigeons. Activity in India is undeniably slowing. Add to that the global slowdown. And it is easy to see why business is imploring for a pause in the tightening. I don’t think that there is much more tightening left to come, but a pause needs to be timed well. Now is not that time. It may have been if the RBI had moved more aggressively last week. True the economy is slowing, but is it slowing sufficiently for inflation to decline on its own? Take away the volatile capital goods component and non-capital IP grew 6.7% in July, the fastest in 4 months. Indirect tax for the first five months of this fiscal year is up 24% despite the duty cuts on petroleum products. Exports grew 44% in August and imports 41%. On the other hand, August headline inflation accelerated to 9.8 %, domestic input prices rose sharply and core inflation jumped to 7.7%, twice the historical average. Critics claim that these are yesterday’s news. One needs to look forward as monetary policy affects the future. True, but core inflation can decline if capacity eases. Our best guess is that trend GDP growth has fallen to 7-7.5%. After last quarter’s 7.7% GDP growth, the output gap (actual GDP less trend GDP) has risen to 1%. For core inflation to fall, growth needs to slow below trend turning the output gap to negative. This happened in 2009 when growth fell below 6%. But nothing today suggests that growth will fall to such levels. Capacity can also ease if investment raises trend growth. A key factor holding back investment is macroeconomic uncertainty, both global and domestic. There is little the RBI can do about the first, but it can reduce domestic uncertainty by inducing inflation to peak and growth to trough early. The quicker the domestic uncertainty is resolved, the sooner investment will resume. This requires the RBI to act more aggressively to bring the cycle to an early end not less aggressively to prolong the cycle. We know since 1972 (Bob Lucas) that the growth-inflation trade-off exists only when expectations are stable not when they are rising as in India now or falling as in Japan in the 1990s. Empirically, we know since the late 1980s (Stan Fisher) that the tradeoff exists only when inflation is low not when the core inflation is twice its historical average. Instead curbing inflation by sacrificing nearterm growth is essential to anchor inflationary expectations and safeguard medium-term growth. Separately it is also argued that inflation is structurally high as nonfarm growth has outstripped agricultural growth. Therefore, policy needs to tolerate a higher “normal” inflation. Nothing can be more dangerous. Many economies have tried controlling inflation at a higher “normal” only to find that it quickly goes out of hand (Latin America in the 1980s and 1990s). We are not there yet but expectations are coming unhinged. The year-ahead inflation expectations of household have been rising since 2009, but till September last year they were below actual inflation. Since then inflation expectations have not only risen relentlessly but are markedly above realized inflation. Households till late last year believed that the authorities’ could bring down inflation, today they are losing faith. Tolerating a higher normal inflation will further erode the authorities’ credibility.
ET
You can bet on 10% deposit rate
MUMBAI: Last week's 25 basis point interest rate hike may not be the last by RBI with many expecting that Governor D Subbarao will announce another 25 basis points increase during his mid-term policy review on October 29. But in case of deposit rates, it now appears that a 10% return is the best that depositors can look forward to, with bankers not facing any pressure to raise deposits because of the improved liquidity scenario. This might also be the best time for depositors to lock-in for long-term deposit schemes since most banks are betting on interest rates to start moving downward within two years and are offering better rates for short-term deposits. "This is the right time to lock into long-term deposits. At the most there may be a 25 to 50 basis points increase in shortterm deposits," said K R Kamath , chairman, Punjab National Bank. "If there is a pick up in credit, banks are tempted to offer slightly higher rates to grow loans but at present we have enough liquidity," he added . On Monday, Dhanlaxmi Bank became the first lender to hike lending rates after last week's rate hike. It howeverleft deposit rates untouched. The main reason why bankers are unlikely to raise longterm deposit rates is that there is ample liquidity in the market. Banks have added Rs 3,01,131 crore to their deposit base up to August 26 this year as compared to Rs 1,81,291 crore last year. During the same period their loan book has grown by Rs 102,779 crore as against Rs 109,189 crore last year. This has enabled banks to repay some of their high-cost deposits and offset some of the increase in the cost of funds. Bankers also expect that interest rates will come down in a couple of years and most banks have therefore not raised deposit rates at the longer end. In fact for many banks' three-year deposits offer lower returns than two-year deposits. Banks with a small share of retail deposits are likely to relook at their deposit rates at the earliest. Typically an increase in deposit rates encourages customers to relook at idle funds in their savings account and transfer the same into FDs.
ET
Problem is Rahul-flation: Why RBI is failing with rate hikes
Why is inflation refusing to lie down and play dead when the Reserve Bank has trained all its guns on it? Why is a government headed by an economist, and who is further surrounded by even more first-rate economists (Kaushik Basu, C Rangarajan, and Montek Singh Ahluwalia), not able to do anything more than wring its hands in despair about inflation?..........
IMF in a quandary over use of gold sale proceeds
...With the price of the yellow metal surging further subsequently, the gold reserves of the RBI today stands shining amid erosion of other assets in the face of escalating inflation, proving that gold still continues to be a safe haven for bankers and gold-affordable retail investors alike, market analysts quip.....
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