RBI brainstorms to increase efficiency

The Reserve Bank of India’s top brass began a two-day brainstorming session in Goa today amid global uncertainties flowing from the sovereign debt crisis of the euro zone and fiscal problems of the US besides fears of high prices and a slowdown in domestic growth.

The annual senior management’s conference, being attended by the Governor, Deputy Governors, Executive Directors, Regional Directors and Chief General Managers, has also invited guest speakers from the academic and financial world.

“The deliberations are aimed at improving efficiency, effectiveness and responsiveness of the RBI as an institution,” said a senior central banker. The theme of the seminar is also in line with RBI Governor D Subbarao’s vision of making the bank a knowledge organisation.

The session comes at a time when the country is facing challenges from all quarters: slowing growth, stubborn inflation and weakening of currency. The rupee has depreciated 16 per cent since August 2011 against dollar, as demand for the greenback has strengthened following the euro zone crisis and fears of a global economic slowdown. Despite the sharp fall of the rupee in the past three-and-a-half months, the central bank is not seen intervening frequently to arrest the fall. RBI officials maintain that their intervention in the foreign exchange market is merely aimed at curbing volatility. The central bank does not aim for any particular level. In September, the RBI intervened in the foreign exchange market. That was when it had sold $845  million, after following a hands-off approach for nine months, according to data released last Friday. The fall in rupee is also expected to fuel inflationary pressure as the country imports nearly two-third of its oil requirement. Rising prices has also been a challenge for the central bank with headline inflation stayed around the double digit mark for 21 months. Despite a series of rate hike — 13 since March 2010 — inflation is yet to come down. RBI expects inflation to change its trajectory in the later part of the financial year and expects it to be at 7 per cent by end-March. After hiking the policy rate by 375 bps between March 2010 and last month, the central bank indicated a pause as growth threatening to slip below the 8 per cent mark.

BS

RBI to issue Rs 1,000 and Rs 10 notes with rupee symbol

MUMBAI: The Reserve Bank today said it will shortly issue Rs 1,000 and Rs 10 notes incorporating the rupee symbol, which was approved last year. The Indian rupee got an unique symbol -- a blend of the Devanagri 'Ra' and Roman 'R' -- last year joining elite currencies like the US dollar, euro, British pound and Japanese yen in having a distinct identity. The Rs 1,000 notes will be of the Mahatma Gandhi-2005 Series bearing the signature of RBI Governor D Subbarao and with the year of printing mentioned on the back of the banknote, the apex bank said in a statement. The design of these notes to be issued is similar in all respects to the existing Rs 1,000 in Mahatma Gandhi Series -2005 issued earlier, except for the rupee symbol. However, all the bank notes in the denomination of Rs 1,000 issued by the RBI in the past will continue to be legal tender.  In another release, the central bank said the new Rs 10 bank notes with the rupee symbol, with the inset letter 'R', will also be released shortly. The Rs 10 notes will also bear the signature of Subbarao and the year of printing on the back side.  All the bank notes in the denomination of Rs 10 issued by the RBI in the past will continue to be legal tender.  The new symbol, designed by Bombay IIT post-graduate D Udaya Kumar, was approved in July 2010.

ET

Scope of RBI’s e-trading platform extended to urban cooperative banks

The Reserve Bank of India (RBI) on Friday extended the scope of its electronic trading platform — Negotiated Dealing System (NDS) —to the secondary market.  With a view to widening the secondary market in government securities to involve more participants, the RBI said it has been decided to extend direct access to NDS-Order Matching (NDS-OM) to licensed urban co-operative banks (UCBs) and Systemically Important Non-Deposit taking non-banking financial companies (NBFC-ND-SIs). The RBI statement said that NBFC-ND-SIs can now acquire shares, stock, bonds, debentures or securities issued by a government or local authority or other marketable securities. However, the RBI notes that the extension of direct membership of NDS-OM to licensed UCBs and NBFC-ND-SIs is subject to the comfort of the respective regulatory department of the RBI and those who are eligible are advised to furnish a no-objection certificate from their respective regulatory departments while applying for an NDS-OM membership. Some of the financial criteria and other requirements for direct access to NDS-OM for the above entities include a subsidiary general ledger (SGL) account with RBI, membership of NDS, Indian financial network (INFINET) connectivity and membership of the Clearing Corporation of India, to name a few.

FE

Banking on ‘nobody’s child’ schemes

..............It is heartening in this context to take note of the RBI Governor, Dr D. Subbarao's voicing concern — at an international conference earlier this week — regarding the Indian financial sector not having a pro-equity bias, and the need for regulation to encourage “socially-optimal business behaviour”. He probably hasn't spoken too soon.

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Bank bias curbs growth, says RBI

The Reserve Bank of India has warned of deep imbalances in the country’s lending system saying capital is allocated to elite industrialists but not to the broader, more dynamic economy. Such a constrained banking system in a large emerging market threatens to restrict economic growth, said the RBI and economists. It also poses a social threat in an economy that needs to create millions of jobs for a young population. K.C. Chakrabarty, Deputy Governor of the central bank responsible for lending supervision, said India’s largely state-owned banking system urgently needed to build capacity to extend credit to a bigger share of the country’s 1.2bn people. He told the Financial Times that failure to achieve “financial inclusion” of the poor would mean that “this society will not survive” and banks must develop a business model to cater for the broader population. Up to 65 per cent of people in India do not have access to bank facilities. “You cannot have financial inclusion in an exclusive society,” he said. His appeal comes at a time when concerns are rising about debt owed by the country’s leading industrialists — such as Vijay Mallya, the chairman of UB Group and Anil Ambani, the chairman of Reliance ADAG — to state-owned banks, which have suffered a rise in non-performing assets as domestic borrowing costs have risen. The government asked the RBI on Thursday to make public details of the top 100 industrialists who had defaulted on loans. The RBI also bought back $2bn of bonds in response to concerns over liquidity in the banking system. Economists have voiced fears that the domestic banking system will be unable to fund India’s fast paced growth against a background of retreating foreign capital flows, rising domestic borrowing costs and a depreciation of the rupee. Many of India’s small businesses and the majority of its people, who earn livelihoods from the rural economy, are starved of credit despite the government offering interest subsidies on loans. “It’s not the cost of credit that is important for the poor, it’s the availability of credit that is important,” Mr Chakrabarty. said “Commerce for the poor is more viable than commerce for the rich . . . The banks are giving the Ambani [brothers] a loan at 9 per cent. Why can’t they give agriculturists a loan at 13 per cent?” The deputy governor said “corrective” measures were under way to reshape the banking system. He expected that private banks would take the lead by finding technological solutions to reach a wider market. Only 5 per cent of India’s 600,000 villages have bank branches but, as part of a financial inclusion policy, the RBI is making the ­allocation of licences for branches in metropolitan areas conditional on the expansion of services in country areas.

FE

When norms change with the times

...The banks too sanctioned many loans without verifying whether other institutions have already released amounts or not. ‘Duplicate' documentation came to light when audits and inspections/financial reviews were carried out. This lead to tightening by the RBI on the real estate lending portfolios of banks......

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Picture not rosy, says Kaushik Basu

NEW DELHI: "The picture is not looking rosy," the government's Chief Economic Advisor K.Basu told Parliament's finance standing committee on Friday in a blunt assessment of inflation and the economy. "About a year ago we thought inflation will come down in a year. We were wrong," Basu candidly told the committee during a discussion on price rise and depreciation of the rupee. While top finance ministry officials held onto a robust "8%-plus" growth rate for the Indian economy, financial services secretary D K Mittal said the manufacturing and mining sectors were slipping but banking has escaped major reverses so far. Finance secretary R S Gujral and other officials expressed the hope that inflation would moderate in the next few months by March, 2012, a prediction that sounded similar to others that have preceded it. Expenditure secretary R Gopal reiterated the view that rising incomes were driving up demand, but MPs asked what the government is doing to address supply constraints. Members pointed out that all rate revisions by RBI have failed to work and banks were now beginning to complain.

TOI

RBI should intervene in forex market if volatility is high: C Rangarajan

Prime Minister's Economic Advisory Council (PMEAC) Chairman C Rangarajan today said the Reserve Bank of India should intervene in the foreign exchange market if it is witnessing high volatility.  "The RBI should intervene to prevent volatility (in exchange rate). If the volatility is high, RBI should," Rangarajan, himself a former RBI governor, told reporters on the sidelines of an event here. He said that fluctuations in exchange rates was a part of India's integration with the rest of the world.  The Reserve Bank of India (RBI) has not set a target exchange rate and corporates should be able to cover themselves from fluctuations, he said.  "There are enough hedging mechanisms to do that," he noted.  His remarks come amidst rupee plunging to 32-month low of sub-51 level against the US dollar.  Speaking on growth, he said India was poised to grow at 9 per cent, adding that there should be no efforts to push beyond that.  He said that this was because it would be difficult to achieve the required investment rate and there would be emergence of strong inflationary pressures and current account deficit (CAD) could widen.  Rangarajan said that financing CAD of 2.6 per cent of GDP would not be a problem, but the target should be to kept at 2.5 per cent. He further said that inflation was expected to ease to 7 per cent by March 2012. 

ET

The price of inclusion

... There has been no period in recent memory when the three key numbers (the twin deficits and inflation) were all flashing red as busily as they are doing today. All three indicators point to excess demand, and at least two of them are....

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Gujarat, UP and Bengal to raise Rs 1,000 crore each using RBI bond auction window

Gujarat, Uttar Pradesh and West Bengal plan to raise Rs 1,000 crore each on November 22 from the capital market using the Reserve Bank of India bond auction window. Overall, eleven state governments plan to enter the market next week for a cumulative Rs 5,860 crore. They will raise the sum through sale of 10-year state development loans using Reserve Bank of India's auction window. Among other states, Andhra Pradesh, Haryana, Jammu & Kashmir, Rajasthan plan to garner Rs 500 crore each while Tamil Nadu will look for Rs 490 crore. Punjab, Goa and Meghalaya will also use the RBI window for Rs 250 crore, Rs 70 crore and Rs 50 crore respectively.  The state government dated stocks will bear interest at the rates determined by RBI at the auctions. Interest will be paid half yearly on May 23 and November 23 of each year till maturity, RBI said in a press statement on Friday.

ET

Corporates express concern over currency volatility

Terming the Indian foreign exchange market as “extremely shallow”, former CFO of Infosys Technologies T. V. Mohandas Pai sought intervention of the Reserve Bank of India (RBI) in the market...........

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Macquarie raises red flag on economy; sees growth below 7% -

Macquarie has cited “lack of policy reforms” and political compulsions as key reasons for the downgrade of its GDP growth projection for the fiscal FY12-13, beginning April 2012, to 6.9%, from 7.9% previously............

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Bhartiya Samruddhi Finance fears default, seeks RBI lifeline

.. "BSFL has approached the Reserve Bank of India seeking its approval to file for corporate debt restructuring,'' said one of the persons who knows the matter." The CDR cell has not received any formal application, but it is in talks with its lenders and exploring the option.''....

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Will Charminar Bank survive RBI decision?

About 10 years ago Charminar Cooperative Urban Bank had become a high point in cooperative banking sector. There were businessmen and communities that wanted to emulate the 'zest and vision' of its chairman Syed Alamadar Hussain Sajjad Aga. But last week, the Reserve Bank of India (RBI) declared the bank insolvent and cancelled its licence.....

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Rules on infrastructure debt funds to be eased

...The Reserve Bank of India will come up with norms next week for banks and non-banking finance companies (NBFCs) to set up infrastructure debt funds. This will lead to release about Rs 1 lakh crore bank loans for core sector projects......

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Are market-linked small savings attractive?

...One of the most significant recommendations was making the returns of small saving schemes market-linked and that is now a reality. From this financial year, the rates for small saving instruments will be benchmarked to those of government securities (G-secs) of similar maturity periods.......

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