United Bank - Change in Constitution of the Audit Committee

United Bank of India has informed BSE that Sri. Sunil Goyal, Part-time Non-Official Director under Chartered Accountant Category has been nominated as the Chairman of the Audit Committee of the Board of Directors of the Bank in place of Smt. Surekha Marandi, RBI-Nominee Director on the Board with immediate effect, at the meeting of the Board of Directors of the Bank held on September 16, 2011 at the Bank's Head Office in Kolkata.

Moneycontrol

SBI Staff College debate for B-school students

Hyderabad : ICFAI Business School won the State Bank Staff College debate competition held as part of its ongoing Golden Jubilee Year celebrations. The Badruka Institute of Management Studies finished second. The topic was “Is power moving from the West to East”. The finals featured a total of four teams. The others were Siva Sivani Institute of Management and Amity Business school. Giving away the prizes to the winners, the Principal of the State Bank Staff College (SBSC), Ms Usha R. Nair, said skills in debating were necessary for students to excel. Ms S. Malhotra Chief General Manager (IA-I) of the SBI, one of the judges said banks held out promising careers for youngsters, especially from the B-Schools.  The college has also held Golden Jubilee Memorial Lectures delivered by Dr C. Rangarajan, Chairman, PM Economic Advisory Council, Ms Usha Thorat and Ms Shyamala Gopinath (both retired Deputy Governors of the RBI) and Mr Anand Sinha, present Deputy Governor of the RBI. The grand finale of the celebrations is scheduled to be held on December 2.  The college has emerged as a leading training institute in the banking industry in the country. The bank has four Apex Training Institutes (ATIs) – three located at Hyderabad, and one at Gurgaon – exclusively devoted to training its senior functionaries and 47 State Bank Learning Centres for employees at lower levels.

HBL

Banks want scope of ‘micro enterprise' expanded

Banks have requested the Reserve Bank of India to expand the scope of the definition of ‘micro enterprises' as fulfilling the lending target prescribed by the regulator for this segment is proving to be a tall order..........

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COMPETITION PHOBIA

The Reserve Bank of India is extremely reluctant to allow new banks to enter the field. Normally, the finance ministry lets it do what it likes. But in the early 1990s, when the payments crisis forced the government to rethink its policies, it also tried to make the RBI do so. The RBI issued 10 bank licences in 1993. Some years later, Yashwant Sinha was keen to make a name as a reformer, and was persuaded of the benefits of competition; he pressed the RBI to give some licences. But he was not very forceful, so in 2001, the RBI issued licences to two banks; fewer than two would have looked ridiculous. In 2004, the new Congress government also came in with ambitions of reforms, and Rakesh Mohan became finance secretary. In his brief tenure he appointed the Percy Mistry committee, which recommended that the RBI should be less stringent in the restrictions it had imposed on the ownership structure of private banks. The RBI’s own Tarapore committee suggested in 2006 that it should be less prejudiced against investment in banks by industrial houses. The Raghuram Rajan committee, reporting in 2008, suggested licensing a large number of small banks. But the governor, Y.V. Reddy, stonewalled, trumpeting central bank independence, and P. Chidambaram did not have the appetite for public rows with him. So the RBI got away with resolute inaction. Pranab Mukherjee replaced Chidambaram as finance minister in early 2009. He too pressed the RBI on bank licences; he is politically powerful, and more difficult to put off. So the RBI drafted a discussion paper, and put it out a year ago. It summarized the conditions it had imposed on new bank licensees in the two rounds of 1993 and 2001, described alternatives in respect of each condition, and arguments for and against them. Now it has published its conclusions, which it has ostensibly drawn from the discussion. Stripped of jargon, its conclusions are as follows. It is dead against foreigners investing in banks. It may allow Indian businessmen — “promoters” — provided that they are found squeaky clean by itself and all arms of the government. The promoters’ companies must be professionally managed; the promoters must not figure too prominently on the board of directors. The RBI knows everything; if a promoter thinks a company does not belong to his group and the RBI tells him it does, he had better not argue with it. It may ask where the promoters got the money to invest in their companies; if it is not out of clean sources like government salaries and pensions, they may be rejected. Stockbrokers, real estate guys and property developers should not even think of applying; the RBI is dead against them. The RBI may seek opinions from other branches of the government; if one of them refuses to give someone a clean chit, he is gone. I cannot imagine any promoter whose companies would not have had an argument with income tax; that department believes in overcharging and then retreating inch by inch. The government will act as a cabal in choosing promoters, and the RBI has equipped itself to reject any promoter it does not like. The RBI will issue licences to a new animal called the NOHC — non-operational holding company. A promoter will be asked to transfer all his financial businesses to this NOHC. One may ask, if anyone who had anything to do with the stock market is summarily excluded, what financial businesses can a promoter have? The answer is, what Indians with their penchant for long and awkward nomenclatures call non-banking finance companies. The RBI has been regulating these for a dozen years or so; if it finds one of them squeaky clean, it may allow its promoter to bid for a bank. But he cannot just convert it into a bank. First he must divide the NBFC into two — one with all the rural branches, the other one without — only the first one will get a banking licence. Then he must set up an NOHC and transfer his shares to it. But before it can bid, his NOHC must make sure it has no debt — only equity is allowed. If the NOHC fails to jump through all the hoops, his rural NBFC will just have to go back to its old business. A bank must have share capital of at least Rs 500 crore. The NOHC must make a public issue within two years after it gets a licence. The NOHC may put in anything over Rs 200 crore, but if it does so, it must sell off all equity in excess of 40 per cent within two years, 20 per cent within 10 years and 15 per cent within 12 years. After that, it must stay at 15 per cent unless the RBI allows. The bank will grow, and as it grows, it will need more capital. Whenever the capital crosses a threshold of Rs 500 crore, the bank must ask for the RBI’s approval. The promoters must get at least 85 per cent of all extra capital from outside. In other words, the RBI is looking for promoters who would set up a bank out of charity, take the risk and expect no returns from it except what portfolio investors would get. More than a half of the NOHC’s directors should be independent of the promoter. They may, of course, be retired bankers and civil servants. More jobs for old boys.

The RBI recognizes that it is a bit unreasonable to expect promoters to set up a bank, sell off most of its shares and then twiddle their fingers. So it will make them twiddle their fingers for only three years; after that, an NOHC will be allowed to set up financial institutions other than banks. But they cannot do any business that the RBI reserves for banks. In other words, no one will be allowed to compete with banks except the RBI’s chosen favourites. Applications for a bank licence must include a business plan. In it, promoters had better give a lot of bumph about how they are going to serve the poorest of the poor, and how they will set up lots of branches in Kashmir, Nagaland, Maoland, Bad Land, Uttar Pradesh, Bihar, West Bengal, and every other place where existing banks do not care to go. If anyone is stupid enough to own more than 5 per cent of a bank’s equity capital, he had better write to the RBI and ask for its forgiveness and approval. If he has lost his mind and let his and his group’s holdings go over 10 per cent, the RBI will — well, it does not say what it will do to him because it just cannot imagine such a thing happening. Even if a promoter fulfils all the above conditions, the RBI does not promise him a licence, for “the new banks need to have strength and efficiency to work in a highly competitive environment”. Competitive environment? Under the RBI? It must be joking.
The Telegraph

Ministry approves proposal for UID-linked direct subsidy transfer

In a notification issued on Tuesday, the finance ministry extended the scope of a task force it has set up to look at the issue of direct transfers, and which will now have members from the Reserve Bank of India, industry body Indian Banks’ Association, the government’s book-keeper Controller General of Accounts, National Payments Corporation of India and National Informatics Centre, to recommend an action plan for direct transfer of subsidy, where ministries and state governments can transfer funds directly into the bank account of a beneficiary, which will be linked to her Aadhaar number.......

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Postal dept to round off prices to nearest rupee

With loose change hard to come by, India Post would be rounding off the price of all its products to the nearest rupee to “overcome problems in daily transactions”. And in the process, the government hopes to reduce the postal deficit which stood at Rs 6,345 crore last fiscal year. Sources said the Department of Posts has proposed that the price of ordinary postcard be doubled to Re 1 while money order forms be sold at Re 1 — four times its present price — following the discontinuation of the 25 paise coins by the Reserve Bank of India from July 1. “Though the RBI has demonetised coins up to 25 paise only, 50 paise coins are also not being accepted almost everywhere and general instructions for rounding off to the nearest rupee are being followed,” they said. Customers are forced to buy extra postcards or money order forms due to paucity of change.

IE

Poetic vital feedback.............

Its Principal's praise............

 

Indian rule change may aid greater money inflows

A new rule under India's Foreign Exchange Management Act (Fema) may usher greater money inflows into the country from Indians living overseas who would want to benefit from higher local bank interest rates on term deposits, say experts......

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Basu’s out of box thinking: Cut policy rates to reduce inflation

There was a strong view in the same meeting that the RBI should have meted out a “shock treatment” by effecting sharp hikes in rates to douse inflationary expectations at the very beginning of the current monetary tightening stance. Those advocating this said high inflation has persisted because the 'baby steps' of small increases in policy rates have been ineffective in anchoring inflationary expectations......

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“RBI move will hit growth”

The Reserve Bank of India (RBI) move last week during its quarterly review of monetary policy to increase key interest rates by 25 basis points would only pull back the economic growth of the country, said Tamil Nadu Chamber of Commerce and Industry. In a statement, its president N. Jegatheesan said that it would accentuate the troubles of the common man as interest rates on home, vehicle and industrial loans would go up. Moreover, it had come close on the heels of the petrol price rise of Rs. 3.14 a litre. Noting that the RBI had hiked the interest rates 12 times since March last year alone to tackle inflation, he said that these moves have not had the desired impact. The chamber was of the opinion that the inflation was being driven by a mismatch between demand and supply rather than higher money circulation. Reduced money flow would adversely affect the off-take of manufactured goods which would only compound the woes of industries.  In order to effectively curtail inflation, the government must address the constraints faced by industries such as high cost of funds and infrastructure deficiencies.

HBL

Inflation key challenge for India, says IMF

Predicting that India's growth would slow down from 10 percent last year to an average of 7.5 to 7.75 percent during 2011-12, the International Monetary Fund (IMF) has cited inflation as its key challenge. "

A key challenge for policymakers is to bring down inflation, which is running close to double digits and has become generalised," the IMF said in the September 2011 World Economic Outlook (WEO) released here Tuesday. "Despite policy tightening, real interest rates are much lower than pre-crisis averages, and credit growth is still strong," it noted. Growth activity is expected to be led by private consumption, the IMF said suggesting "investment is expected to remain sluggish, reflecting, in part, recent corporate sector governance issues and a drag from the renewed global uncertainty and less favourable external financing environment". Noting that headline inflation in Asia is projected to average 5.25 percent in 2011, before receding to 4 percent in 2012, assuming commodity prices remain stable, the IMF said against this backdrop, further exchange rate flexibility remains a key policy priority for emerging Asia. Real GDP growth in emerging and developing economies during the second half of 2011 is expected to be about 6.25 percent, down from about 7 percent during the first half of the year, the IMF said. Propelled by China and India, emerging Asia is forecast to continue to post strong growth of about 8 percent. A number of major emerging and developing economies, and advanced economies with very close ties to them, continue to see buoyant credit and asset price growth. Credit growth has been high in Brazil, Colombia, Hong Kong, India, Indonesia, Peru, and Turkey, the IMF said. Among G20 economies, the structural deficit is very large in India and appreciable in South Africa. The experience of advanced economies shows how much policy room may be needed in the event the credit cycle suddenly turns. Elsewhere in emerging Asia, deficits and debt are less of a concern, the IMF said.

DH

India: Inflation nation

There are structural factors at play as well, which cannot be tackled with higher interest rates alone. This puts RBI in a spot, because it cannot be a spectator as inflation expectations cut loose but it also cannot deal with the underlying structural factors with its policy kit....

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'Inflation to remain high for next three months'

Inflation is expected to remain high for the next three months and the Reserve Bank of India’s next move on policy rates depends much on how the situation pans out in the coming three weeks, according to Prime Minister’s economic advisory council chairman C Rangarajan. “Monetary policy has a role to play even in supply-side inflation,” he said while indicating that further hike in policy rates is imminent if the inflation stays high. Inflation may come down to 7 per cent from the present 9.6 per cent level only by March 2012, he maintained. On the other hand, the constraints in maintaining the deserved levels of current account deficit and fiscal deficit have become more pronounced on account of the current global economic scenario even as monetary and fiscal measures are equally needed to balance growth and inflation in the country, according to him. It is difficult to maintain the current account deficit at the current level of 2.5 per cent of the GDP if the world economic situation worsens, affecting the capital inflows into the country. Expenditure side management is also getting difficult on account of ballooning subsidies, especially due to international oil prices, to keep the fiscal deficit at 4.6 per cent of the GDP as targeted, he said. Delivering the foundation lecture for the civil services and IFS officer trainees on Tuesday, Rangarajan said the economy had the potential to grow at 9 per cent but the short and medium term constraints, including inflation, were to be attended to realise the potential. Despite the present constraints, the economy is expected to grow close to 8 per cent in the current financial year though strict measures to manage both the supply and demand side inflation are required to ensure that the kind of high inflation witnessed during 70s and 80s did not return. Growth in incomes is just one dimension of the development and who benefits from the economic development is equally important, he said, stating that social security measures like the National Rural Employment Guarantee Scheme were aimed at addressing these inherent needs. While admitting that problems in land acquisition had been coming in way of faster capacity additions in power sector, he, however, said the conflicting interests in the economy had to be addressed as in the case of land acquisition. Responding to a question, he said the efficiency in use of capital in proportion to output was at acceptable level and further improvement was always desired. He also said the Indian IT sector might get impacted to the extent of economic slowdown in the US and Eurozone. However, he does not see the possibility of the US economy entering the negative growth zone.

BS

Reasons for inflation known, but no light at the end of tunnel

With the persistent near double-digit headline inflation, despite sustained increases in key policy rates by the Reserve Bank of India, turning out to be “a frustrating experience for policymakers,” senior officials from the Planning Commission, the Finance Ministry and the RBI met with a group of academic economic experts and representatives of the International Monetary Fund (IMF), the World Bank and the Asian Development Bank (ADB) at the National Institute of Public Finance and Policy (NIPFP) here last week to address the policy conundrum......

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Top economists agree more rate hikes will not check inflation

India’s top economists have broadly agreed that further interest rate hikes by RBI will not check price rise. They met at a closed door session last week to figure out if they were missing some trick because of which inflation was just not coming down from double digits. .............

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