Banks told to develop own biz models to provide service in rural areas



Ms Uma Shankar, Regional Director, RBI, handing over a loan sanction letter to one of the beneficiaries in a credit campaign launched at Bagalkot. Mr C. Sambasiva Reddy, Chairman, KVG Bank, and Mr A.K. Bhattacharya, GM, RBI, are also seen



Hubli, Nov. 25:  “Banks should develop their own business models to achieve financial inclusion (FI) roll out”, said Ms Uma Shankar, Regional Director, Reserve Bank of India, Bangalore. Speaking after inaugurating the credit camp for small and medium sector organised in Bagalkot by Karnataka Vikas Grameena Bank (KVGB), Ms Shankar said banks should also introduce bankable schemes and open financial literacy and credit counselling centres in the North Karnataka to improve the credit flows. “So far, only about five per cent of the six lakh villages across the country have been provided with banking facilities. “The task of achieving inclusion of a large populace, who are deprived of banking services, is clear. Thus RBI's main focus is towards promoting greater inclusion,” she added. While appreciating the efforts of KVG Bank under financial inclusion, she said the regional rural banks play a major role in inclusion. Banks should take advantage of simplified procedure of know your customer (KYC) norms towards reaching more people.  “To address the issue of uneven spread of bank branches banks are permitted to freely open branches in smaller towns with population up to 49,999 people. “Banks were mandated to allocate at least 25 per cent of the total number of branches to be opened during a year to unbanked rural centres,” Ms Shankar added. A model scheme on Financial Literacy and Credit Counselling Centres (FLCCs) was formulated by the RBI. In Karnataka, as on date, 30 such centres are functioning covering 27 districts.“In Karnataka, the RBI had identified nine villages for transforming them into model villages by providing banking facilities to all residents,” she said. Mr C. Sambasiva Reddy, Chairman of KVGB, appraising the bank's performance and its social involvement said “KVG Bank has taken much care of implementation of financial inclusion and already has appointed 285 business correspondents (BCs) and opened 52 financial inclusion branches.”   

HBL

Usha Thorat and Margaret Cole Join ICFR's International Advisory Council

London : The International Centre for Financial Regulation has appointed Usha Thorat and Margaret Cole to its international advisory council. Usha Thorat is Director of the Centre for Advanced Financial Research and Learning, Reserve Bank of India, and Cole is a managing director of the Financial Services Authority.

http://www.icffr.org/

Banks should be resources of growth: Thorat

Expert advice:

Former Deputy Governor of Reserve Bank of India Usha Thorat at a function organised by Fisat Business School in Kochi on Friday

KOCHI: Banks have to provide financing resources necessary for the sustained growth trajectory of the Indian economy, said Usha Thorat, former Deputy Governor of the Reserve Bank of India. She was delivering the maiden lecture of the FISAT Business School (FBS) lecture series in Kochi on Friday. "We are looking at a high growth rate of 8-9% of the Indian economy and banks will have to play an exceedingly important role in facilitating this rate of growth. Such a growth will have to come from the manufacturing and agriculture sectors. But so far our stress has been on the services sector," Thorat said. "Infrastructure and urbanisation will call for huge project financing and this will be another challenge that Indian banking will have to face. Meeting the challenges of globalisation is another task ahead for the Indian banking sector," she said. Thorat also talked about the possibilities that information technology could offer the banking industry. "To achieve broader inclusive growth, banks must leverage technology and put in place a ubiquitous interoperable payment system to increase the efficiency of processes, dealing with millions of clients and to achieve better internal risk management," Thorat said. Noting that people have been investing in gold and real estate instead of monetary savings, she said, "To increase the rate of growth or even sustain current growth rate of the economy, more savings will have to go in the form of financial savings. This would mean that banks must increase their focus on financial inclusion programmes; besides, there would have to be a benign inflationary environment which would be conducive for people to move their savings from real estate and gold to financial savings."

TOI

Cops try to dissuade MoD babu from filing FIR after theft

It's the fag end of the year, the time when the Delhi Police try every trick in the book to dissuade complainants from registering FIRs. A deputy director in the ministry of defence experienced this firsthand when he went to get a burglary case lodged recently. In the early part of November, the Laxmibai Nagar residence of Ashok Kumar Singhal, 57, was burgled for the second time in 2011. Appallingly, not only have the police been unable to crack both cases, they tried to convince the MoD official not to file an FIR when the second heist took place. Their reason: it was "very difficult" to trace the accused. According to Singhal, his brother informed the law enforcers about the crime on November 7 and a written complaint was also submitted in this regard at the Sarojini Nagar police station. The case was finally registered on November 17, with the police officers concerned claiming that they were informed about the incident only on November 15. "The police are contradicting their own written documents. They stamped my brother's complaint on November 7 and then tried not to register the case when I came back from a vacation. They tried to convince me on the pretext that the stolen items would be returned if they stumbled upon the accused," Singhal recalled. The victim lives in a type IV government quarter in the south Delhi locality with his wife, an Assistant Manager in the RBI, and a daughter who is an eleventh standard student. "I have always believed in the system. But I am amazed how the police try to hush up problems rather than solving them," Singhal remarked. On November 5, the Singhal family departed to Tamil Nadu for a holiday. On November 7, a neighbour informed his brother in Delhi that the door of their house was ajar. "My brother rushed to the site from Saket and informed the police. He filed a complaint of theft at the Sarojini Nagar police station," Singhal said. The MoD official returned from the holiday on November 14 and went to the police station the next day. "The incident has taken place between November 4 and 14, and a case has been registered," the FIR read. It had no mention of the complaint filed on November 7. In February, too, burglars had stolen articles such as 200 grams of gold. "The police haven't divulged any information on the progress of that case as well," he said. Shockingly, the November burglary is the fourth crime in the same lane of Laxmibai Nagar. "It has become a routine and nobody is concerned," Singhal said. 

India Today

Subsidies are bad: D Subbarao

Chandigarh: Advocating fiscal consolidation and containment of fiscal deficit, Reserve Bank Governor D Subbarao today termed subsidies given on fuel, fertiliser and irrigation as "bad" ones and stressed on weeding out unproductive expenditure. Delivering the P N Haksar Memorial lecture here, Subbarao said, "In charting a roadmap for fiscal consolidation, we need to be mindful of the quality of fiscal adjustment-- which is to weed out unproductive expenditure and protect growth promoting expenditure," he said. Sharing his thoughts on subsidies in his address on 'Rejigging the Elephant Dance: Challenges to Sustaining the India Growth Story, Subbarao said, "There are bad subsidies and there are good subsidies". "Bad subsidies like fuel subsidy, subsidy on LPG may be Rs 300 but every time you buy LPG you are getting subsidy to the extent of Rs 300. Not only you, Mr Birla, Mr Ambani, every time they buy a cylinder, they will also get subsidy," he said. "Then there is fertiliser subsidy...soil degradation happens because of fertiliser subsidy and thereafter irrigation subsidy," he said. Subbarao said there were good subsidies as well, like giving cycles to girls to come to school and constructing toilets for girls in schools located in villages. "These are good subsidies," he asserted. He said about 75 per cent of the government's expenditure constitute payment of salaries, pension etc. He emphasised on the importance of a stable and predictable macro-economic environment which was necessary for growth. "Fast growth gained through an excess can be an allure because the signs of instability brewing in underbelly are often not visible real time. But when implosion inevitably happens, the losses by way of lost growth and welfare can be monumental," he said.

FE

Good governance key to keeping India growth story intact: RBI

Chandigarh, Nov 25 (PTI) Concerned over the economic slowdown, RBI Governor D Subbarao today outlined the 10 challenges to keeping India''s growth story intact and asserted that "providing good governance" would be critical in this regard. There may be several challenges to acceleration of growth, he said, adding that identification of these areas and drawing up plans to address them is the relatively easy part. "What is infinitely more difficult is the translation of those policies into action," he said. Delivering P N Haksar Memorial Lecture here, Subbarao said, "In the ultimate analysis, it is the quality of governance that separates success and failure in economic development..." Among the 10 challenges, he said it would be imperative to bring inflation down to 5 per cent or even lower to regain the growth momentum and accelerate the rate further. He said a high inflation scenario makes both savers and investors uncertain and there is a need for a stable macroeconomic environment. Emphasising on the importance of a stable macroeconomic environment, he said the fiscal deficit needs to be controlled and inflation must come down. "The first is reduction of fiscal deficits... The second task is to bring inflation down first to 5 per cent and then even lower (for stable macro-economic environment)...," he said. The governor said the current inflationary woes are a consequence of both supply shocks and demand pressures. Maintaining that the RBI''s monetary tightening policy has been aimed at restricting demand and anchoring inflationary expectations, he said, "This has to be supplemented by supply side responses to raise the potential output of the economy." 

MSN News

'Need to bring inflation to 5%'

Reserve Bank of India (RBI) Governor D Subbarao on Friday said inflation must be brought down to five per cent, or below that, to stabilise the macroeconomic environment and facilitate sustainable growth. "A high-inflation scenario makes both savers and investors uncertain," said Subbarao. He added the monetary tightening policy was aimed at restraining demand and anchoring inflation expectations. India's inflation indicator — the wholesale price index — has been above nine per cent for the last few months. To tame inflation, RBI has raised policy rates by 375 basis points in thirteen tranches since March 2010. The central bank expects inflation to ease in the December-January period, before declining to seven per cent by the end of March. While monetary tightening addresses demand-side pressures, the central bank's efforts must be complemented by supply-side responses. "The current inflation we are experiencing is a consequence of both supply shocks and demand pressures," Subbarao said, adding it was necessary to reduce the government's high fiscal deficit to stabilise growth to sustainable levels. For the current financial year, the government had estimated fiscal deficit at 4.6 per cent of the gross domestic product (GDP), and this now increasingly seen as a difficult target. The RBI governor said India's growth was credible, but the country needed to increase agricultural productivity, expand employment and productivity, promote financial inclusion and bridge infrastructure deficit. He said infrastructure deficit was hampering faster economic growth and efforts to curb the deficit had fallen short. The annual infrastructure investment would have to be increased to 10 per cent of GDP from the current six per cent to meet the requirement of $1 trillion over next five years, as estimated in the 12th Plan. Pointing to the need of infrastructure financing in India, Subbarao said projects should be financed by long-term sources like insurance and pension funds, not banks, which could face exposure risks and asset-liability mismatches. "Since these markets in India are still not deep enough, the burden of financing infrastructure is falling on banks," he said. Corporate debt would go a long way in augmenting infrastructure financing, but the market was demand-constrained and needed attention, he added. On financial inclusion, he said banks continued to see it as an obligation, not an opportunity. He emphasised banks need to change their perceptions and tap business opportunities in unbanked areas.

‘Elephant dance must be rejigged’

RBI Governor D Subbarao on Friday said just as East Asians resembled tigers and China the dragon, India stood for an elephant. India's high-growth trajectory before the crisis proved elephants, too, could dance. "But the elephant dance was interrupted by the ‘zoo party’ of the global financial crisis. To get it back on course, we need to rejig the dance," he said.

BS

PPF to earn higher returns from Dec 1

NEW DELHI: The finance ministry has notified rules which will pave the way for small savings account holders to earn higher returns from December 1. Earlier this month, the government had accepted the recommendations of a panel which would help investors earn higher interest on small savings schemes. An expert panel, headed by former RBI deputy governor Shyamala Gopinath, had recommended moving to a market-linked interest rate system for small savings schemes that would translate into higher returns for now. The return on the Public Provident Fund ( PPF) scheme in the current fiscal year is expected to be 8.6%, up from 8%, while the return on the five-year national savings certificate plan would be 8.4% from 8%. The annual ceiling on PPF accounts will now go up to Rs 100,000 from the current Rs 70,000. Small savings accounts in post offices will now fetch 4% interest up from 3.5% now. Interest rates on deposits of other maturities would also go up from December. The finance ministry also notified that the sale of the popular Kisan Vikas Patra would be stopped from November 30. The panel was of the view that this instrument was being used in some areas for money laundering as it was a bearer instrument.  The maturity period of monthly investment schemes (MIS) and national savings certificates would be reduced from six to five years. MIS would earn an interest of 8.2%, but accounts which are functional on or after December 1 would not be entitled for bonus. The reforms of the small savings schemes were stalled after protest from agents and some political parties. The agents were protesting the reduction in commission paid to them.  The implementation of the report will help garner funds for the government from small savings schemes. The increase in the PPF investment ceiling is expected to get a good response from investors, officials said.

TOI

RBI deregulates interest on savings accounts in UCBs

The Reserve Bank today deregulated interest rate on savings accounts in Urban Co-operative Banks (UCBs), a move that will fetch better returns for depositors. RBI had freed savings bank deposit rate for the scheduled commercial banks last month.  Subsequently, it had liberalised this for the Regional Rural Banks earlier this week. In a notification addressed to all Primary (Urban) Co-operative Banks, RBI said lenders are free to determine their savings bank deposit interest rate subject to two conditions. Under the first condition, the notification said, "Each bank will have to offer a uniform interest rate on savings bank deposits up to Rs 1 lakh, irrespective of the amount in the account within this limit." The other condition states that for savings bank deposits over Rs 1 lakh, a bank may provide differential rates of interest, if it so chooses. This would, however, be subject to the condition that banks will not discriminate in the matter of interest paid on such deposits, between one deposit and another of similar amount, accepted on the same date, at any of its offices, it said. Till now, such banks were mandated to give 4% interest rates on such deposits. The rate was increased from 3.5% in May this year.

BS

Global players wary of fine print on India retail invite

Global supermarket chains welcomed a long-awaited invitation from India to invest in the country's $450 billion retail market, but they fear the small print may keep a lid on investment in the short term..........

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With Economy Slowing, the Indian Rupee Tumbles

... For several months, India has suffered the double misfortune of a slowing economy and high inflation. Now, it has another problem: a rapidly depreciating currency.....

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RBI: opening up retail to help growth, curb inflation

India's growth story is still "credible" and the move to open up the economy to global supermarket chains will help growth and control inflation, RBI Governor Duvvuri Subbarao said on Friday. "It's commendable that government has taken the initiative. Let's hope that it will improve the logistics chain and supply chain management in agriculture," Subbarao said in a speech in Chandigarh. Late Thursday, the government approved 51 percent foreign direct investment in the supermarket sector, paving the entry of firms such as Wal-Mart, Tesco and Carrefour into one of the world's largest untapped markets. "It's important for not only raising overall growth but also important for containing inflation and improving quality of life over 50 percent of population," Subbarao said.  Opening up the retail sector to global players has been a much awaited reform but has been long hobbled by political differences. The Congress-led government's biggest ally Trinamool Congress is opposed to the move. The RBI chief said that inflation needs to be brought down to 5 percent initially and then even lower, consistent with India's integration with global economy. Subbarao said the current inflation situation is a consequence of both supply shocks and demand pressures. Monetary tightening needs to be supplemented by supply side measures to raise potential economic output, he said. "Raising agricultural production and productivity is, important for containing price pressures, raising rural incomes and making growth more inclusive," Subbarao said. India's inflation, which is largely driven by high food and global commodity prices, plus expansive fiscal policies, is the highest among major economies in Asia. It's wholesale prices rose more than expected in October as the cost of food and fuel increased. The high inflation print, above 9 percent for the 11th month, was further evidence of the Reserve Bank of India's (RBI) inability to achieve a breakthrough in its fight against inflation despite 13 rate rises since March 2010. In its Oct. 25 mid-quarter review of monetary policy, the RBI had said that a rate hike may not be warranted if inflationary pressures start to ease by December. Slowing growth, stubbornly high inflation, rising interest rates, political gridlock, gloom in the West and a sliding rupee have conspired to dampen investor and corporate sentiment in Asia's third-largest economy. The RBI has lowered the country's growth forecast to 7.6 percent for the current fiscal year ending in March from 8 percent previously. Subbarao says a reduction of federal and state fiscal deficits are important steps for a stable macro environment. India's fiscal deficit during April to September was 2.92 trillion rupees, or 70.8 percent of the full-year target, government data showed. Most expect it to breach the 4.6 percent of GDP target for the fiscal year. The government said it would sell debt worth 2.2 trillion rupees, sharply above the budgeted 1.67 trillion rupees in the October to March period.  Subbarao said that India being a emerging economy with a partly open capital account, floating exchange rate and a monetary policy that takes into account global developments, has to continue to manage the "impossible trinity." The impossible trinity refers to the economic hypothesis that a country simultaneously cannot have a fixed exchange rate, an open capital account and an independent monetary policy. Subbarao said the volatility in the foreign exchange market will remain until the euro zone crisis is resolved."Until there is a credible solution to the sovereign debt problem in Europe, we will see movements in the exchange rate," Subbarao said.He added that the central bank is watching the rupee, but could not say whether it will intervene in the forex market directly.The rupee has skidded nearly 17 percent from a 2011 high reached in late July as risk-averse investors flee emerging markets, increasing the difficulties for a government already struggling with high inflation, slowing economic growth and a widening trade gap.The rupee touched an all-time low of 52.73 on Tuesday and state-run banks were spotted selling dollars in the market in recent sessions, sparking talk of RBI intervention. On Wednesday, RBI deputy governor Subir Gokarn said intervention has been aimed at smoothing sharp movements in the rupee.

Reuters

MoF cries halt to NDF arbitrage to rescue rupee

...However, market players admit that containing the NDF market and bringing it onshore would be easier said than done. “The RBI has been trying to do this for years now but has somehow not succeeded,”....

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RBI warning on Gold Sukh‘ unheeded'

JAIPUR: Reserve Bank of India (RBI) had advised the special operation group (SOG) of the state police to look into the operations of Gold Sukh Trade India Ltd six months ago. However, the lackadaisical attitude of police resulted in a multi-crore scam which otherwise could have been avoided. In its half-yearly meetings with officials from police, financial institutions and other related agencies, the RBI had warned about Gold Sukh's dubious operations. But there was no response from the state police in this regard. The state government was also asked to bring an Act to regulate the multi-layered marketing companies. "RBI consistently issued circulars and urged governments to enact a law at their level so that the companies which work in grey areas can be accommodate under some law. Till date, 14 states in the country have done this and unfortunately Rajasthan is not one among them," an official said. However, G S Sandhu, additional chief secretary (home), who took over the post a month ago, said, "RBI sent a draft on regulating multi-layered marketing companies sometime back. The draft is now in the process and we will soon bring a law regarding this. In the meetings with RBI earlier, it does give us names and we had promptly taken actions." As per the law, if any company wants to engage in any business activity, it needs to register itself under the Indian Companies Act 1956. Once registered, they become incorporated under the act and termed as public limited company or private limited company. These companies are then regulated by a regulator enacted by Parliament or by the state government concerned. For banking and non banking financial services, RBI is the regulator and for stock markets, the regulator is Security Exchange Board of India (SEBI). However, there are certain companies which do not fall under purview of any of the regulators and that is where companies like Gold Sukh operates and takes advantage of the grey area. Earlier, the income tax department had conducted raids at four residential premises and one business premises of Gold Sukh here, but no strict action was taken against it. Sanjiv, additional director, income tax (investigations) said, "The I-T department had conducted a search and seizure operation at Gold Sukh in Jaipur in November 2009. The assessment of the property seized is still undergoing". "Lack of any regulator is the reason for the mushrooming of multi-layered marketing companies in the state. Punishment for willful attempt to evade tax above Rs 1 lakh is six months to seven years in addition to tax, penalty and interests on the seized amount," an financial expert said.

TOI

Forex counters at airports likely to be relocated

...The question was exactly where the RBI guidelines regarding holding, buying or selling foreign exchange, as well as the provisions of the Foreign Exchange Management Act would come into play.....

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When norms change with changing times

.. Comprehensive instructions from the RBI were issued to banks in 2008, which was updated in 2009. Prior to this, only sporadic circulars on the subject was issued by the RBI. Banks were also given specific allocation for housing finance on an annual basis effective as on July 1 every year, based on the deposit growth.....

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RBI needs to raise PCFC rates according to market realities: FIEO

NEW DELHI: The Reserve Bank of India (RBI) has been requested by the Federation of Indian Export Organisations (FIEO) to raise the packing credit in Foreign Currency (PCFC) rates, which are in line with market realities, said Mr Ramu S Deora, President of FIEO. Mr Deora while speaking on the all-in-cost trade credits to 350 basis points (from 200 basis points) has stated that this would be helpful in achieving more dollars inflows to the Indian market. Mr Deora, said, “This is in keeping with the demand as the differential between rupee interest rates and dollars has accentuated further with the 13th hike on 25th October 2011 pushing policy rates to 8.5% whereas a six month LIBOR is still around 1%.” FIEO feels that RBI’s move to surge FCNR(B) deposit rates by 25-basis points will also accentuate dollar inflows (125 basis points from 100 basis points) apart from NRE term deposits where the banks can pay either LIBOR or at swap rates. Recently, RBI has surged the interest rates on Non-Resident (External) (NRE) Rupee term deposits and Foreign Currency Non-Resident (Banks) (FCNR-B) deposits. This move is likely to surge the flow of foreign exchange in midst of the poor domestic currency. The surge in rates will be making the funds more lucrative at a time when the Indian Rupee has declined strongly in the past few months.

http://news.indiamart.com/story/rbi-needs-raise-pcfc-rates-according-market-realities-fieo-150540.html

RBI allows Iranian central bank to open A/Cs

Kolkata: In an effort to resolve a long-standing payment crisis, the Reserve Bank of India (RBI) has given permission to the Central Bank of Iran to open rupee accounts with two Indian banks, namely UCO and IDBI. "Permission from the RBI has very recently come to open rupee accounts with two Indian banks, one of which is UCO," a top official of city-based UCO Bank said. The other bank is IDBI Bank. Both the accounts were opened in the respective banks' Mumbai branches. The official said since the closure of the Asian Clearing Union (ACU) in December, payments for oil imports from Iran and non-oil exports to that country have been severely affected. The UCO official said there was some understanding between the RBI and the Iranian central bank about the mechanism of making payments. He said that the Iranian central bank would park funds in the two Indian banks to enable payments for oil imports by India as well as non-oil exports to Iran. To a query, he said it was not yet known whether the Iranian central bank had already parked funds in the two accounts. The official said while payments for oil imports would initially be in rupees, it would be then converted into a separate currency, which was yet to be decided by the apex bank.

Manorama

RBI Outstanding Loans to Govt $3 Billion

The Indian government's outstanding loans from the Reserve Bank of India under the ways and means advances facility were ($3 billion) 158.49 billion rupees in the week ended Nov. 18, up from ($2.5 billion) 132.72 billion rupees the previous week, the central bank said Friday. The WMA is a withdrawal facility provided by the RBI to the government to meet temporary mismatches in its cash flows. If the government's borrowing exceeds 75% of the WMA limit at any point, it has to repay the RBI by borrowing from the market through the auction of bonds. The government is allowed 10 consecutive working days to repay its overdraft with the RBI. The state governments' borrowing under the WMA facility was 13.22 billion rupees, compared with 7.49 billion rupees a week prior, the RBI said in its weekly statistical supplement.

WSJ

Sa-Dhan releases Bharat Microfinance Report 2011

Microfinance Focus, November 25, 2011: Sa-Dhan, a network of microfinance institutions in India, releases its Bharat Microfinance Report 2011 titled ‘Microfinance: Under Scrutiny But Resilient’. Dr. K. C Chakrabarty, Deputy Governor, of the Reserve Bank of India (RBI) formally released the report at an event organized by Sa-Dhan on November 23 at the Indian Habitat Centre in Delhi.........

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Rupee volatility to remain till eurozone crisis resolved : D Subbarao, RBI Governor

CHANDIGARH: Volatility in the foreign exchange market will remain until the euro zone crisis is resolved, Reserve Bank of India Governor D. Subbarao said on Friday. Subbarao said in a speech in the north-western city of Chandigarh that the central bank is watching the rupee, but could not say whether it will intervene in forex market directly. The rupee has skidded nearly 17 percent from a 2011 high reached in late July as risk-averse investors flee emerging markets, increasing the difficulties for a government already struggling with high inflation, slowing economic growth and a widening trade gap. The rupee touched an all-time low of 52.73 on Tuesday and state-run banks were spotted selling dollars in the market in recent sessions, sparking talk of RBI intervention. The rupee fell in afternoon trades on Friday as equities stayed negative and dollar demand from oil companies lingered. A fall in the euro also hurt sentiment. At 2:14 p.m., the partially convertible rupee was at 52.22/23 per dollar, weaker from Thursday's close of 52.065/075. The unit has so far moved in the 52.07-58.27 band. Traders said some comfort was seen from the government's decision to liberalise foreign investment in the $450 worth retail market, but big positions could be seen only after actual inflows materialise. The euro fell to a fresh seven-week low against the dollar on Friday and was set to weaken further as a lack of agreement between European leaders on how to tackle the spreading debt crisis in the euro zone continued to rattle nervy investors.

ET

Should RBI help to prop up the rupee?

Amid the brouhaha surrounding inflation and an industrial slowdown, the new joker in the pack appears to be the exchange rate...................

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Rate hikes and other factors driving up NPAs

...The increase in interest rates when growth has visibly slowed down affects the capacity of borrowers to service their debts to banks. Consequently, the NPAs of PSBs has increased sequentially from 1.92 per cent of gross advances in the quarter ended March 2011 to 2.11 per cent in quarter ended June 2011 and 2.36 per cent for the just concluded September quarter......

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