Dharwad achieves 66% under agri-lending Rapid Action Plan

Hubli : The Reserve Bank of India (RBI) has suggested to banks in Dharwad district to have a Financial Literacy and Credit Counselling Centres (FLCC) at each Blocks. Mr R. Ramachandran, Manager, RBI- Bangalore, while reviewing the performance of banks in the district under Financial Inclusion Plan (FIP), as Lead Bank (Vijaya Bank) is opening Financial Inclusion Resource Centre and also Financial Literacy and Credit Counselling Centre jointly sponsored by Syndicate and Vijaya Bank under the banner of Jnana Jyoti Financial Literacy and Credit Counselling Centre at Dharwar on September 30. The District Level Review Committee (DLRC) meeting chaired by Mr S.V. Dindalkoppa, Project Director, Zilla Panchayat-Dharwar, was held at Karnataka Chamber of Commerce premises. Advising the bank that by just designating business correspondents (BCs) does not serve the purpose of FIP, “There should be full-fledged implementation of FIP by operation of biometric cards,” Mr Ramachandran said. He advised the bankers to speed up the process to cover the remaining 51 unbanked villages of above 2,000 population by the end of this year. Mr Y.N. Mahadevayya, Nabard Assistant General Manager, while reviewing the progress made in the district under Rapid Action Plan of Banks, observed that the coverage is only 66 per cent, remaining 43,000 farmers are to credit linked according to the district statistics by September 30.  While reviewing the district credit plan (as on June 2011), he observed that the total priority disbursal during the quarter is Rs 264.38 crore against a target of Rs 369.72 crore thereby achieving 72 per cent.  Under agriculture Rs 116.46 crore, Small scale Industries (SSIs) Rs 12.45 crore and other priority sector the achievement stood at Rs 135.47 crore.  He advised the bankers to step up advances under agriculture and SSI.  Mr B.A. Tata, Regional Manager, Vijaya Bank, Regional Office-Hubli, speaking on the occasion said the bankers should make special efforts to cover all eligible non-loanee farmers under rapid action plan by end of this month and also advised the bankers to complete Financial Inclusion Plan (FIP) in unbanked service area villages of population above 2,000. As of now coverage is only 26 out of 77 villages.

HBL

Inflation | Decoding the dynamics – Deepak Mohanty



Higher subsidy translates into higher fiscal deficit, which has inflationary implications



While inflation is expected to moderate towards the later part of the year, reflecting monetary tightening and likely softening of global commodity prices, fiscal policy needs to be supportive in containing aggregate demand. In addition, there is an urgent need to address the issue of structural supply constraints, particularly in agriculture, so that these do not become binding constraints in the long run, hampering the task of inflation management.

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Monetary Policy | Key factors shaping trajectory – Dr.Subir Gokarn

The core objectives of monetary policy in the future will remain what they have been in the past. The primary objective of monetary policy is a low and stable inflation. In achieving this, the economy has to be allowed to maintain growth at the highest possible rate consistent with a low and stable inflation.....

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Financial Inclusion | A road India needs to travel – Dr. K.C.Chakrabarty

........financial inclusion is the road that India needs to travel toward becoming a global player. Financial access will attract global market players to our country and that will result in increasing employment and business opportunities. Inclusive growth will act as a source of empowerment and allow people to participate more effectively in the economic and social process....

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ECB window for finance firms not advisable: Thorat

Usha Thorat, chairperson of the Reserve Bank of India’s (RBI) panel on finance companies, on Wednesday said she did not favour allowing financial companies to raise funds through external commercial borrowing( ECBs), since lending by external agencies is actually carried out keeping the government’s comfort level in mind. As a matter of policy, RBI has never favoured entities regulated by it to intermediate between domestic and overseas markets, Thorat said, while addressing a conference on non-banking financial companies (NBFCs). Financial stability eventually emerged as a sovereign risk. Overseas lenders would be more comfortable in giving funds to financial sector player, she said. This facility was allowed for a short term after the global financial crisis. Infrastructure finance companies are also permitted to use the ECB window to raise resources, she said. She added access to finance would only be in the domestic market through non-convertible debentures, certificates of deposit and bank credit. Dependence on deposits from the public by permitted NBFCs must be done away with, she said. On whether demand would continue, considering the current liberal norms of treating accounts as NPAs, she said RBI’s 90-day norm experience with urban cooperative banks showed recoveries from such accounts were better. If action was not initiated early (in case of outstanding repayments), the chances of recovery diminished early. According to current RBI norms, NBFCs can treat an account as an NPA only if the payment is outstanding for 180 days.

BS

May his soul rest in peace.....

I deeply regret to report the passing away on 19th September 2011 in New York of Shri Anand Chandavarkar. He unarguably was the foremost exponent of the Indian economic scene and an acknowledged authority on John Maynard Keynes. He is noted for his grace in style, felicity of expression and profundity in knowledge. His credentials are impeccable. He is a graduate from the University of Bombay and the London School of Economics, where he was a student of Karl Popper, Michael Oakshott, two political philosophers of world repute. Greater distinction is that he was the disciple of three Nobel Laureates in Economics, Friedrich Hayek, James Meade and Ronald Coase. One cannot have more distinguished teachers. The teachers could not have a more distinguished disciple.  Professionally he served in RBI, IMF,OECD and World Bank; Economic Adviser, Bank of Libya; Consultant to the Organization for Economic Cooperation and Development (Paris), the World Bank, and the Presidential Commission on Finance and Banking, Sri Lanka.  He was the author of "Keynes and India" "Central Banking in Developing Countries . His latest book was "The Unexplored Keynes and other essays". He has published widely in leading academic and professional journals, including The Economic Journal, The Oxford Economic Papers, The Quarterly Journal of Economics and the Economic and Political Weekly.  He made a significant contribution to The Cambridge Economic History of India.  He was aninvited speaker at the Tenth Keynes Seminar at the University of Kent,Canterbury, England (1991) and the One Hundredth Annual Meeting of the AmericanPhilosophical Association, (Eastern Division), Washington D.C., 2003. He is a rare economist, a profound scholar who writes with transparency and eloquence, and he has many interesting things to say. His writings on Keynes are particularly fascinating and attracted a huge readership. His deep knowledge of history of economics and economic analysis reflect the long and useful life he led as a teacher and researcher in academic and international organizations. Shining through his writing is his compassion and humanity. Anand Chandavarkar displays his customary ability to "excite the judgement briefly rather than to inform it tediously". He is India's foremost and finest scholar of Keynes. His book, “Keynes and India” remains aclassic. He had worked in the Department of Research and Statistics of RBI for a number of years and some of us were privileged to have worked under him. My wife and I had the privilege of visiting him in Washington and this "Gentle Colossus" came down to the ground floor to see us off.Scholarship combined with utmost courtesy one comes across rarely. We mourn the loss of a great scholar, a perfect gentleman and a raconteur par excellence. He was 88 years old at the time of his death.  

As reported by P.P.Ramachandran (via e-mail)

What timing!

RBI rate hike with a fuel price hike thrown in! Who is managing this inexplicable timing? The latest tightening of rates by RBI, with another one perhaps soon after, can only help in unsettling market sentiments and make the economic outlook darker, which is the greatest foe of the common consumer. Though the latest fuel hike will brighten up the balance sheets of oil companies, but will also heavily impact food prices.

R Narayanan, Ghaziabad (FE)

IT DRIVES INNOVATION IN THE BANKING SECTOR

As India moves towards financial inclusion in the banking sector, technology will play a key role in achieving this goal
In a country of 1200 million Indians, which has only 400 million bank users, there is an urgent need to ensure financial inclusion and greater transparency, and banking technology will play a crucial role in driving this change. On Thursday, September 8, 2011, key players of the banking industry converged at the ITC Grand Central in Mumbai to discuss the issues involved in this transformation, at the fifth edition of The Economic Times Banking Technology Conclave ’11. The conclave, ‘Indian Banking 2015: Towards Technology Enabled Transformation’ had speakers discussing a wide range of issues impacting the sector – the importance of technology investments, partnerships with the Information Technology sector, customer-centricity for higher profitability and the emerging frontiers for cooperative banks, among other things. “Information technology in banking is fast evolving,” said a KPMG White Paper, released on the occasion. “From enabling banking services to driving transformation in the industry, Information Technology holds a promise to change the face of banking in the next few years. New entrants are looking to leverage their existing strengths in the Indian banking arena. The opportunity available to these entrants through leveraging their understanding of technologies and markets they operate in promises innovative business models with a focus on delivering customer value.” The need to provide personalised, speedy and cost-effective services is pushing banks to further reorient and innovate the business model of banking and enabling technology, the paper adds. Mr M.V. Nair, Conference Chairman & Chairman and Managing Director, Union Bank of India, highlighted four emerging trends in banking technology. Mr Nair referred to an integrated multi-channel delivery system; financial inclusion; customer relationship management and IT governance. He also spoke of the importance of green IT initiatives for business competitiveness and cost efficiency, pointing out that modern IT systems were complex and sophisticated, but they were also “energy guzzlers”.  “According to statistics, every watt required for computer power creates the need for another watt for cooling,” Mr Nair said. “It becomes one of the integral parts of Green IT to develop a strategy for implementation of less paper offices to paperless offices. Initiatives like the solar-powered ATMs with which we are experimenting at Union Bank of India may go a long way towards green technology in banking”. The challenges involved in reaching out to last-mile customers formed an integral part of the discussions. Sunny Banerjea, Partner and Head, Management Consulting, KPMG India, pointed out that thanks to mobile phones and other devices, today’s consumer had far more computing power in his hand than it had taken to “get man to the moon in the 1960s”. However, as most bankers would agree, customers could not be looked at as a homogenous group, and strategies for rural and urban customers would necessarily have to be different.  Shikha Sharma, Managing Director and CEO, Axis Bank Ltd, pointed out that while the market was a large one, there were differences in the way the older generation, and the younger one, perceived their banking needs. She also raised issues of changing mindsets and workforce training for the new era of computerisation. There is no doubt that the complex world of Indian banking has already seen tremendous change. With many transactions taking place through the Internet, mobile banking and Automated Teller Machines, customers no longer need to wait in long queues during working hours to get their passbooks updated, or to withdraw money. Even cooperative banks, which have largely operated through traditional models, have begun to see the need for technology-enabled transactions; The Greater Bombay Co-operative Bank Ltd. for instance, has seen value in opening innovative E-lobby Banking branches, and streamlining their systems by achieving ISO 9001:2008 certification. “In just 150 sq ft space, we have seven machines which allow you, among other things, to deposit cash, pay electricity bills and get your passbook printed,” said Narendrakumar A Baldota, Chairman of the Bank. “Banking is available 24x7 and customers come in even at 1.00 a.m. or 2.00 a.m. And the cost is hardly Rs 12 lakh for these seven machines”. In June 2010, Reserve Bank of India had asked all banks to present a three-year financial inclusion plan by incorporating the government's goal of making banking facilities available in all villages with 2000 population by March 31, 2012. The Government is also planning to leverage the Unique Identification Authority of India (UIDAI) project to further achieve financial inclusion, a fact that most bankers at the conclave agreed would make a huge difference.  For emerging markets to move ahead in the global arena, however, there are primarily four issues that need attention. In achieving these goals, banking technology will certainly make a vital difference, simplifying the banking process, offering speed and convenience to the customer in an increasingly competitive era, and also playing a holistic role in financial inclusion. As speakers at the Conclave agreed, while there are many challenges to be met, the process is certainly gaining momentum.

ET 

Maha planning awareness campaign against online frauds

Considering the increasing number of cases of online fraud, Maharashtra government has decided to take steps to create public awareness. The city police's Economic Offences Wing today filed an affidavit before the Bombay High Court, stating that it had hired advertising agency Lowe Lintas to create awareness advertisements. Reserve Bank of India (RBI) too has been requested to issue advertisements, asking people not to fall prey to alluring but shady online schemes, it said. The division bench of Justices D D Sinha and V K Tahilramani was hearing two public interest litigations filed by investors who were allegedly duped by schemes of Speak Asia and Symbiosis Trade Link. On the allegation by the petitioners that police initially refused to look into the complaints, public prosecutor Pandurang Pol told the court that inquiry had been initiated. The EOW has also sought special courts for economic offences for speedy trials. The court was informed that in the Symbiosis matter, the first complaint was lodged in February 2010, but action had not yet been initiated. "What have the police done so far? People want perpetrators to be brought to book. Such cases should be taken to logical conclusion," Justice Sinha said. Speak Asia, a Singapore-based online survey company, is alleged to have cheated people by promising huge returns for taking part and investing in its surveys. Symbiosis Trade Link runs similar scheme from Pune. 

IBN Live

Growth & Inflation aren’t Related

The growth-inflation trade-off proposition is a policy rip-off. There is no theory that quite establishes such a relationship. At best, evidence is empirical and cross-country. Cross-country empirical evidence has to be taken with several pinches of salt, since there are countries with 0% inflation and those with 3000%. No country with 0% inflation has had respectable growth, neither has one with 3000%. Inflation is caused by excess of demand over supply. Growth should lead to increase in supply, unless there is something wrong with nature of growth, or unless we are talking about time-lags. Indian inflation has agro, manufactured goods and commodities. Take the first, agro-cum-food inflation. We have known since late 1980s that productivity growth is tapering. We added more of a fiscal squeeze in early 1990s, adversely affecting extension services and public investments. Then we threw in public expenditure of the consumption variety. MGNREGS templates don’t allow for creation of productive assets. We added hikes in procurement prices, increased input costs because of MGNREGS (wages), power, diesel and fertilizers. With all the economic expertise floating around within government, we couldn’t see the food inflation coming. We couldn’t see shifts in consumption patterns — milk products, egg, fruit and vegetables, fish, meat. Trends have been around since 1987-88. So for food, I don’t understand what this growth-inflation trade-off is supposed to mean. We ensured demand increased, but not supply. There’s a reckless public expenditure problem, best addressed through fiscal policy. Monetary policy has nothing to do with it. Manufactured good isn’t terribly different. Investments and capacity-creation go through cycles. It should not be very difficult to foresee this, nor should it have been difficult to anticipate that interest rate hikes and general policy uncertainty would hurt. Effectively, the economy was chugging along at 9% (Let us not blame global financial crisis for everything. Volatility in exchange rates and capita flows and an uncertain export environment apart, those effects soon passed.) There are people within government who have now picked up RBI as a whipping boy, arguing tightening monetary policy is counter-productive. True, but in terms of diagnosis, nothing has changed between 2008 and 2011. Why didn’t they realise it then? At that time, they wanted monetary policy tightening. Time and again, they have stuck their necks out on forecasts of inflation, to be proved repeatedly wrong. Thus, barring nitty-gritty details about which inflation index to use, inflation has remained where it was. But growth has dropped to 7.5%, perhaps lower still. By trying to do something about inflation, we have reduced growth. No trade-off, but that’s the growth-inflation paradox. We should forget about knee-jerk and short-term reactions to inflation, beyond containing liquidity through fiscal restraint. We should loosen monetary policy. Tolerable levels of inflation should be 10%, not 5%. But once we have done the sensible things, growth will revive to 9% and inflation will drop to something like 7%. That degree of inflation will remain and should be fine, as long as we have real income growth. This isn’t a country of double-digit inflation, normally.

- BIBEK DEBROY, Economist & Research Professor, Centre for Policy Research  (ET)

New norms for national payment systems

Mumbai: In revised criteria for national payment systems, the Reserve Bank of India (RBI) on Wednesday said all licensed banks will need a minimum CRAR of 9%, net NPAs below 5% and minimum net worth of R25 crore in the centralised payment systems. With a view to strengthening the risk management framework, as also to facilitate wider access to payment systems, the Reserve Bank of India had constituted a working group to review of the existing access criteria guidelines. With these eligibility the banks can Real Time Gross Settlement (RTGS) System, National Electronic Fund Transfer (NEFT) system and National Electronic Clearing Service (NECS). According to the notification, RBI mandates two sets of access criteria- one for centralised payment systems and the other for decentralised payment systems. While for decentralised payment systems such as clearing houses at MICR centres and Electronic Clearing Service (ECS) including the Regional Electronic Clearing Service (RECS), the access criteria will need a minimum CRAR of 9% and net NPAs below 5%. The revised access criteria will come into effect from October 1, 2011. However, the present relaxation granted to state cooperative banks and the district central cooperative banks and post office saving banks in membership to clearing house at MICR centres will continue. Unlicensed banks can continue to participate in the decentralised payment systems as sub-members.

FE 

Govt managers 'yet to grasp' inflation reasons

As inflation remains high despite the Reserve Bank of India (RBI) hiking the interest rate several times, experts believe that the Union government’s managers do not have a complete understanding of the reasons behind the continued price rise. Also, there is no consensus on whether the RBI should pause its persistent monetary tightening stance......

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After banks, housing finance cos to do away with prepayment penalty

... NHB Chairman RV Verma told FE, "We are trying to ensure that customers from HFIs and banks should be treated alike, and the prepayment penalty, just like in the case of banks, should be waived by the HFIs as well. The RBI is in the process of issuing guidelines. We are also planning to issue (similar) guidelines to ensure that everyone gets a fair deal.”.....

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Reserve Bank is unlikely to raise rates in next policy meet

The Reserve Bank of India is unlikely to raise rates further but inflation will remain at elevated levels for another six months, said Chetan Ahya, managing director of Morgan Stanley.......

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India can’t afford to grow below 8%: Chidambaram

Kolkata: At a time when there are apprehensions of further rate hikes by the RBI and the growth figures are on a downward curve, home minister P Chidambaram on Wednesday said that India cannot afford to grow below 8%.  His statement comes days after Union finance minister Pranab Mukherjee said that there are signs that growth is being affected by monetary tightening. Chidambaram said, “ without growth we cannot build capacities. The ball is growth and we have to keep our eyes on the ball. We cannot afford to grow at anything less than 8%.” Earlier in July, industrial growth in the country fell to a 21-month low of 3.3% against 9.9% in the same month the previous year. 

FE

26 co-operative banks go belly up in 2010-11

As many as 26 co-operative banks failed in 2010-11 which resulted in credit insurance companies paying over Rs 268 crore to depositors. Twenty-six co-operative banks, which include 10 from Maharashtra, six from Gujarat and five from Karnataka, have failed to repay deposits to customers during the last fiscal. In 2009-10, 29 cooperative banks across the country had closed operations. Under the Deposit Insurance and Credit Guarantee Corporation (DICGC), a wholly-owned subsidiary of the the Reserve Bank of India (RBI), insurance norms, a maximum of Rs 1 lakh is paid to a depositor in case the bank goes insolvent. The RBI's credit insurance arm has paid over Rs 268 crore to depositors of 26 co-operative banks which went bankrupt in 2010-11. The DICGC paid the maximum amount of Rs 45.43 crore to Ahmedabad Peoples Cooperative Bank of Gujarat. Other Gujarat-based lender Shri Sinnar Vyapari Sahakari Bank got Rs 40.66 crore, Surendranagar Peoples Cooperative Bank (Rs 30.74 crore) and Surat Mahila Sahakari Bank (Rs 26.44 crore). Besides, the credit insurance company paid Rs 16.92 crore to depositors of Rahuri Peoples Cooperative Bank of Maharashtra and also Rs 15.24 crore to the account holders of Katkol Cooperative Bank of Karnataka, according to RBI. At the same time, one each from Uttar Pradesh, Assam and Andhra Pradesh also closed operations. 

BS

The urban banking model cannot work in rural areas

Dollar shortage may choke India Inc.'s overseas borrowing

...In fact, the dollar shortage, which has been there since July, is one of the reasons for the reversal in the rupee's fortunes,....

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RBI needs to intervene in forex market, says StanChart

The Reserve Bank of India (RBI) needs to more actively intervene in the country’s foreign exchange market to stem the rupee’s fall as imported inflation rises and exchange rate volatility risks increase, said Standard Chartered Bank in a research note on Wednesday. The increasing chatter about intervention comes as the partially covertible rupee touched a two-year low of 48.24 to a dollar on Tuesday and remains the worst performer amongst the 10 major Asian currencies. It has already weakened by over 7 percent so far this year. The central bank, in its mid-quarter policy review last Friday, said that the rupee’s depreciation may have adverse implications for inflation. Foreign exchange dealers have suspected the RBI’s presence in the foreign exchange market in recent sessions, but it hasn’t been significant to turn the rupee’s fortunes. The Reserve Bank of India’s stated position is that it intervenes only to stem excessive volatility. But in recent years, it has largely let the rupee free unlike its Asian peers. A bulletin released by the RBI on Sept. 13 showed it had not bought or sold dollars in the foreign exchange market for eight successive months including July. But, the RBI’s hands-off policy may have made the unit more vulnerable during periods of risk aversion, the report said. Standard Chartered however said that the central bank is yet to signal that forex-related risks have risen significantly. This may be partly due to the central bank’s higher tolerance and partly due to the liquidity implications of higher intervention, the note said. Higher intervention will lead to a squeeze in rupee liquidity from the system, lowering system cash to “undesirable levels,” it said. “Hence, intervention is likely to stay sporadic and low, aimed at addressing volatility rather than imported inflation risks,” the report said.

Firstpost

‘Rising Imported Inflation Calls for RBI Intervention’

Increasing the risk of inflation due to surging prices of imported goods, on account of weakness in the rupee, and risks of volatility in foreign exchange rate make a case for RBI intervention, says a Standard Chartered report.  “We take the view that rising imported inflation and forex volatility risks support the case for greater intervention. However, RBI is yet to signal that foreign exchange-related risks have increased substantially,” the report says.  The central bank had briefly intervened in the foreign exchange market last week to cap the rupee below 48 per dollar, after the domestic unit fell by over 9.5% since July. This intervention came almost after a year, with the last intervention from the regulator in October just before the Coal India IPO, when the rupee escalated to levels above 43 per dollar.  “Price action shows, downside pressure remains strong, and one-off intervention may not be enough in an environment of growing contagion risks,” adds the report. The report states that though RBI maintains it will intervene when the volatility in the rupee could disrupt the real economy, the central bank’s tolerance threshold for USD-INR pair has increased substantially, which has left the rupee vulnerable. The reasons cited for this aversion to greater intervention is the liquidity implications. “Banking-system liquidity is currently close to the lower limit of RBI’s comfort zone and is unlikely to improve near-term. In such a scenario, significant RBI intervention to stem rupee depreciation may strain liquidity to undesirable levels,” the Standard Chartered report says. With foreign exchange reserves of $316 billion, the central bank has sufficient capacity to intervene to support the market during periods of dollar demand-supply mismatch, say analysts.

ET

Will Reserve Bank intervene in foreign exchange market?

The RBI's involvement in the foreign exchange market has declined significantly over the last couple of years, though its stated foreign exchange policy has remained largely unchanged.....

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