Subbarao Hints at More Rate Hikes Till Inflation is Tamed




Inflation is hurting the poor, says RBI Governor Subbarao; A moderation in growth will help address inflation, says his deputy Gokarn



 The Reserve Bank of India has said the central bank needs to control inflation before it can lower interest rates, hinting that it may hesitate to pause on raising rates although industry and Indian lenders have pitched for a halt to monetary tightening. Inflation is hurting the poor, RBI governor D Subbarao said in Jaipur on Wednesday. “(We) need to tame inflation before bringing down rates,” he said. Subbarao said rising inflation was a concern and that controlling inflation was the main focus of the monetary policy. The central bank will review its monetary policy on October 25. Subbarao’s deputy Subir Gokarn too echoed similar views earlier in the day saying a further rate hike would hinge on the inflation scenario. “We raise rates not because it is an end in itself. To the extent, we see the problem persisting, then there is a basis to raise rates but if we see the problem is starting to ease off, then that would provide the basis for a change,” he told students in Jaipur. Headline inflation which was close to 10% in August is likely to come down by the end of this fiscal, Subbarao said.  The Reserve Bank of India has raised interest rates 12 times since March 2010 to tame inflation but with little success as it has remained over 9% for over a year. With factory output growth also slowing down, industry and bankers have made out a case to the central bank to put an end to rate tightening. On its part, the central bank wants the government to address supply-side issues to curb prices.  Subbarao said the Indian economy would expand between 7.5% and 8%. “Despite having some adverse impact of dismal global economic conditions, the economy of India is strong. The growth is likely to be between 7.5% and 8%,” he said at a meeting of the Rajasthan Chamber of Commerce in Jaipur.  There are already signs of a slowdown in growth. Factory output in August rose marginally to 4.1% YoY well below the consensus estimate of 4.7%. In sequential terms, industrial production contracted 0.3% monthon-month (seasonally adjusted) following the 1.1% month-on-month contraction in July. On a 3m/3m (seasonally adjusted) basis, growth declined 5.1% 3m/3m (annualised rates) against 5.9% in July.  The Reserve Bank of India expects that a moderation in growth could help address inflation. “Controlling inflation remains one of the most important items on the agenda of the central bank. While oil and food prices are putting pressure on inflation, a moderation in growth will help ease inflation,” said Gokarn.  Subbarao said RBI is conscious of the need to bring down interest rates to help the economy grow.

ET

RBI Governor Subbarao inaugurates newsibition in Jaipur

Jaipur: Reserve Bank of India (RBI) Governor Dr D Subbarao today inaugurated a newsibition (news-cum-exhibition) at the Jawahar Kala Kendra here with the motive to enlighten people about development of central banking in India and facilitate them to have a general understanding about the processes of economic development.  Mr Subbarao who arrived here last evening on a three-day visit, will preside over meeting of the Central Board of Directors of the bank here tomorrow. “The meeting which is to be held in the Pink City after a gap of seven years, would be attended by four Deputy Governors and 12 directors of the bank to provide general superintendence and direction to the affairs-policy of the bank”, a RBI Spokesman said here. “It was mandatory for the bank to hold six meetings of board of directors every year but out of the convention the bank holds seven meeting in a year”, the spokesman said. 

http://www.newkerala.com/news/2011/worldnews-85654.html 

New Rs 2, Rs 5 coins out to confuse you

THIRUVANANTHAPURAM: Be more conscious about your money. Chances are high that you give a Rs 2 or a Rs 5 coin instead of Re 1. The newly-released Rs 2 and Rs 5 coins will confuse not only the visually challenged, but also the general public. The size of the new Rs 2 is exactly similar to the existing Re 1 coin. The stainless steel coins have round edges. The new Rs 2 carries the rupee symbol and ‘2’. This is the only difference with the Re 1 coin. Those who see the other side would mistake Rs 2 for Re 1 and vice versa. The colour of Rs 5 will help, but the size would deceive the visually challenged. The new Rs 5 is a bit larger than a 50 paise coin and a bit smaller than the Re 1 coin. The size and round edges will show a resemblance to the Re 1 coin, but its golden colour will catch one’s attention. However, chances are high for the visually challenged to confuse it with a 50 paise or Re 1. Visually challenged people had protested in 2006 when a Rs 2 coin was introduced with striking resemblance to the Re 1 coin. With the introduction of more such coins, the RBI is likely to face the wrath of the visually challenged as well as the general public.

IBN Live

RBI serious on problem of fake currency & Banks: D Subbarao

The Governor of Reserve Bank of India D Subbarao said that RBI is serious about problem of fake currency and Banks and Police have been directed to take strict action in such cases and to ensure prevention of fake currency. Addressing a meeting of Rajasthan Chamber of Commerce in Jaipur today Mr Subbarao said that RBI has instructed banks to ensure clean notes also.He said that plastic currency will be introduced in the country and it will be started with 10 Rs note.

APN News

RBI allows UCBs to act as money changers

Mumbai: The Reserve Bank on Wednesday said the Urban Cooperative Banks (UCBs) would henceforth be eligible to act as full-fledged money changers. In a notification, the apex bank said that UCBs "would be considered for authorisation as Authorised Dealer Category-I/ Authorised Dealer Category-II" as they fulfil eligibility norms with regard to money changing. Authorised banks and Full Fledged Money Changers are allowed to provide facility for reconversion of Indian Rupees to the extent of Rs 50,000 to foreign tourists on receipt of valid passport and VISA, ticket confirmed for departure within 7 days and original ATM slip.

Zee News

RBI guv Subbarao stresses on financial inclusion in state

Jaipur: The Reserve Bank of India governor D Subbarao said banks in Rajasthan will ensure that all 3,883 identified villages with total population of more than 2,000 are meaningfully covered in the first phase of financial inclusion plan by March 2012. Attending a special State Level Bankers’ Committee (SLBC) meeting here on Wednesday, he said that banks will draw up specific strategies to improve the credit-deposit ratio in three districts, namely, Dungarpur, Rajsamand and Sirohi which have low CD ratio. Banks will set up at least one financial literacy and credit counselling centre in the minority blocks in the state by the end of January 2012, he added.  Earlier in the day he inaugurated a newsibition (newscum-exhibition) at the Jawahar Kala Kendra aimed at enlightening people about development of central banking in India. Today, he is scheduled to preside over meeting of the central board of directors of the apex bank here on Thursday. The meeting will be held in the Pink City after a gap of seven years.

TOI

RBI hints 2nd quarter review may not lower policy rates

Ahead of second quarter review of monetary policy on October 25, RBI indicated that it may not lower the key interest rates as inflation is still high. "...We need to bring inflation down in order to bring interest rates down," RBI Governor D Subbarao said here. He further said that the central bank is conscious of the need to bring down interest rates to boost economy, but it might take time. RBI is for a low interest-rate regime but that will take time, he said. The Governor expressed concern over the rising inflation, but said it could be controlled by the end of this year. The Reserve Bank of India (RBI) is scheduled to hold its quarterly review of credit policy on October 25. However, it is unlikely that the RBI will pause its rate hike strategy on account of the slowdown in industrial output growth. The RBI has already hiked rates 12 times since March, 2010, to control inflation, which stood at 9.8 per cent in August. During August, the Index of Industrial Production (IIP) declined to 4.1 per cent against 4.5% recorded in the same month a year ago. Factory output stood at 5.6% in the April-August period, as against 8.7% in the same period last year, according to official data released today. Addressing members of Rajasthan Chamber of Commerce, Subbarao said the economic growth will remain between 7.5% and 8%. Earlier during the day at special State Level Bankers' Committee (SLBC) meeting of Rajasthan, the Governor said financial inclusion needs to be meaningful. Banks in Rajasthan will ensure that all 3,883 identified villages with total population of more than 2,000 are meaningfully covered in the first phase of financial inclusion plan by March 2012, RBI said in a statement. It said banks will draw up specific strategies to improve the credit-deposit ratio in three districts of Rajasthan, namely, Dungarpur, Rajsamand and Sirohi which have low CD ratio. State government of Rajasthan will release its share of Rs 39 crore towards recapitalisation of five regional rural banks in Rajasthan, it said. The Governor and other senior officials of RBI are in Jaipur to attend a meeting of the Reserve Bank's Central Board of Directors being held in Jaipur tomorrow. 

Moneycontrol

RBI hints mood change on lower rates

Jaipur : The Reserve Bank of India (RBI) is conscious of the need to bring down interest rates to help the economy grow, said RBI governor D Subbarao at an industry event. Earlier in the day, deputy governor Subir Gokarn had said that the RBI will change its monetary policy stance only if inflation eases and further rate increases will depend on the price rise situation. “It (further rate hike) depends on the inflation situation,” said Gokarn. “We raise rates not because it is an end in itself. To the extent we see the problem persisting, then there is a basis to raise rates but if we see the problem is starting to ease off, then that would provide the basis for a change.” Gokarn also said that higher income levels were increasing the tolerance for higher inflation.

HT

RBI may change policy stance if inflation eases, says Gokarn

Jaipur: The Reserve Bank of India (RBI) will change its monetary policy stance only if inflation eases and further rate increases will depend on the price rise situation, Subir Gokarn, deputy governor at the central bank, said on Wednesday. “It (further rate hike) depends on the inflation situation,” Subir Gokarn said while addressing students in Jaipur. “We raise rates not because it is an end in itself. To the extent we see the problem persisting, then there is a basis to raise rates but if we see the problem is starting to ease off, then that would provide the basis for a change.” India’s food and fuel inflation accelerated in mid September, indicating persistently high inflationary pressures in the economy. Data for September, due around 12 noon on Friday, is likely to show the wholesale price index probably rose 9.70 percent a year earlier, easing slightly from 9.78 percent in August. However, inflation continues to stay at nearly twice that of the RBI’s comfort levels, raising the possibility of another rate increase by the Reserve Bank of India on 25 Oct, when it meets to review monetary policy. Gokarn also said higher income levels were increasing the tolerance for higher inflation. The benchmark 10-year bond yield rose following Gokarn’s comments on the policy stance, while weaker-than-expected factory output data, already factored in by the market, also lead to some selling. Industrial output in August rose a lower-than expected 4.1 percent from a year earlier, government data showed. The 10-year paper was trading at 8.73 percent, up 3 basis points from its previous close. The inflation data would now be crucial for helping cement views regarding the policy stance. Gokarn said robust domestic demand will help absorb the shock from the global slowdown. Indian manufacturing growth nearly stalled in September, turning in its weakest showing since March 2009 on slowing output and order growth as a year-and-a-half of interest rate increases and weakening global conditions take a toll on Asia’s third-largest economy. “Countries like China and India has large population and hence has robust demand which will help in absorbing the global shock.”

Firstpost

IIP sluggishness persists, but RBI may maintain tight stance

The fears of a slowdown are becoming more real with the factory output showing a lower-than-expected growth of 4.1 per cent in August, as the high cost of credit, rising prices and uncertain global environment continue to curtail demand and investment. This was only marginally better than the output growth in July at 3.8 per cent. It grew 4.5 per cent in August last year. Finance Minister said the IIP (index of industrial production) figures may impact India’s second (July-September) quarter GDP. “It is not encouraging. It is a bit disappointing and it may affect the GDP of second quarter,” he told reporters here. The Indian economy grew 8.5 per cent in 2010-11, but in the first quarter slowed down to 7.7 per cent, the lowest in six quarters.  Economists and analysts, however, said that the Reserve Bank of India that is scheduled to review its monetary policy on October 25, is unlikely to put a break in its hawkish stance given the high headline inflation, that stood at 9.8 per cent in August. Inflation, it seems, is a bigger concern for the central bank with deputy governor Subir Gokarn today saying that RBI’s decision on the direction of interest rate movement will depend on the inflationary situation.

IE

New norms for FCCBs on the cards

... India’s banking regulator plans to frame rules that will curb the enthusiasm of companies floating foreign currency convertible bonds (FCCBs) to raise money even as many Indian companies are grappling with the challenges of redeeming such bonds.....

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Press pause on rate hikes, chambers tell RBI

New Delhi : The Reserve Bank of India should pause its interest rate hikes as the deceleration in industrial growth is now clearly apparent, with both consumer and capital goods segments showing sluggish growth, Mr B. Muthuraman, President, Confederation of Indian Industry, said. He was reacting to the Index for Industrial Production numbers.  Industry performance in July-August 2011-12 is estimated at around four per cent compared with 7.2 per cent in the year-ago period. The RBI has hiked the key policy rate, repo rate, by 350 basis points since September 2009.  The Punjab, Haryana Chamber President, Mr Salil Bhandari, said there was need to ensure credit availability to industry at reasonable rates and moderation in input costs.  GDP growth in the second quarter of 2012 may fall below 7.5 per cent, he said in a release.  The Federation of Indian Chambers of Commerce called for reversal of some of the monetary tightening measures to stimulate domestic demand.  “The growth in consumer goods sector, especially consumer durables, is much below expectations, especially so in the festive season,” said Mr Harsh Mariwala, President, FICCI. He said “Investment demand has also been affected in the last few months as indicated in the negative growth of machinery which was -1.8 per cent in April-August 2011. “We expect the growth in industrial sector and investments to be low in coming months as the impact of rising cost of credit would continue.”

HBL

Is there a way out for India’s slowing economy?

...The next RBI policy meeting is on 25 October and perhaps another 25 basis point-hike (hopefully the last one) may be in store if the inflation number for September, out this week, shows no sign of calming.....

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BRIC currencies may snap losing streak

Rio de Janerio/ Beijing: All four BRIC currencies -- the Brazilian real, Russian rouble, Indian rupee and Chinese yuan -- will recoup at least some of their recent heavy losses over the next 12 months, a Reuters poll showed on Wednesday. The latest Reuters BRIC FX survey showed the real, rouble and rupee recovering slowly after diving more than 10 per cent against the dollar over the last three months, as low borrowing rates in sluggish developed economies force investors to seek yield in dynamic emerging markets. The rouble and rupee, will take the lead, expected to gain more than five per cent and six per cent, respectively, according to the median estimate of around 70 analysts, economists and strategists polled by Reuters.

FE

Move to make IFFCL infra finance firm gains steam

The Union Cabinet is likely to discuss a finance ministry proposal to convert India Infrastructure Finance Company Ltd (IIFCL) into an infrastructure finance company, a kind of NBFC, with a higher authorised capital. IIFCL currently does not fall under the regulatory oversight of the Reserve Bank of India (RBI) and is controlled by the finance ministry. The position will alter if the proposal fructifies. Last year, the RBI had created a new category of non-banking finance companies, called infrastructure finance companies. The other categories are asset finance companies, loan companies and investment companies. A Bill to alter the 2006-founded IIFCL is expected to be discussed at a meeting of the Cabinet likely to be held tomorrow, officials said. If the proposed changes are approved, IIFCL will be converted into a special category infrastructure finance company with a higher paid-up capital of around Rs 5,000 crore. Currently, the state-owned company has an authorised capital of Rs 2,000 crore and paid-up capital of Rs 2,000 crore. The Cabinet is also expected to discuss a proposal from the department of public enterprises that would empower all profitable central public sector enterprises to decide on overseas acquisition of raw natural assets without seeking approval from the government. The meeting is expected to also discuss a proposal to enable India join a global organisation of wine and vineyards.

BS

Wrong Number

Economists, policy planners and even RBI Governor D Subbarao have complained about the quality and veracity of data that the government’s statistics office puts out. Only the minister who is in a position to do something about it is conspicuously unconcerned. That’s because Shrikant Jena, who was handed the ministry of statistics and programme implementation portfolio in the last ministerial reshuffle, is deeply unhappy at being denied a cabinet berth. So much so that not only has this unglamorous ministry reverted to its old ways after enjoying a brief revival under Jena’s predecessor M S Gill, but Jena has not held even one press conference since taking charge. Officials say the minister is reluctant to meet even beat correspondents — not because there is no information to give but because he’s simply not interested in the ministry.

BS

Great ire stalls Greater Ranchi

The spectre of protests over land acquisition has reared its ugly head again, as around 50,000 settlers on land earmarked for Greater Ranchi project are united in their stand against even a topographical survey, going to the extent of taking two surveyors hostage on Tuesday for three hours as part of their sustained resistance strategy. According to the Greater Ranchi project, buildings such as secretariat, high court, marketing complexes, IT parks and others will come up, signifying Jharkhand’s entry into the “modern age”. The HEC areas will have high court building, Assembly, secretariat, residences of ministers and MLAs, the offices of the Reserve Bank of India, etc. The rest will come up at Sukurhutu on the outskirts of Ranchi where survey is yet to begin.

The Telegraph

Bangla duo held for string of burglaries

KOLKATA: Police on Wednesday arrested a Bangladeshi duo, suspected of being involved in at least five daylight burglaries. theft.They are suspected to be involved in crime within Ultadangaas RBI officersa quarters, Ayakar Niwas, Government Housing Society and South Eastern Railway officersa quarters. They had also cleaned an apartment in Nakeldangaas Eastern Railway officers' quarters.

TOI

Our books clean: Dhanlaxmi Bank

.... Amitabh Chaturvedi, MD & CEO, Dhanlaxmi Bank, said the bank has complied with all the rules laid down by the Reserve Bank of India(RBI). “We continue to interact with the RBI on a regular basis and there is no concern on compliance or the asset quality front,” he said......

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