FinMin secy DK Mittal's grandstanding irks bankers, RBI

Two weeks back, a strong statement by RBI Governor D Subbarao on the government's dictatorial style of exercising ownership in state-owned bank triggered mixed reactions among bank bosses

...............Periodic cold war between RBI and the department of financial services is nothing new. But it always makes headlines whenever it surfaces. 

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"Micro management of banks"

"In a recent article on "Micro management of banks", Shri Vishvanathan, a brilliant banker who had served SBI with great distinction, has identified a few operational issues on which problems are likely to be encountered if Government were to micromanage PSBs and issue directives on such operational issues. One of them relates to classification of loan assets as NPAs which goes against the directives of the RBI. This is a serious matter and cannot be left unattended. Statutory auditors would have difficulty in determining whether a loan asset is to be classified as NPA or not on the basis of conflicting directives of Government/RBI. This would have an impact on the reckoning of even the Capital adequacy ratio of the bank. RBI would, therefore, have to take up the matter early with the Government ( if not already done) and the matter should be sorted out.  It would be advisable for RBI to tell the Government that they should leave such matters to the RBI and refrain from issuing directives on operational issues in future."

- A. Chandramouliswaran (via e-mail)

Poor human resource management practices in Indian public sector could lead to a serious setback

.....More than a year back, the RBI governor made a plea for a level playing field for PSU banks with enough freedom to hire executives and employees on competitive terms. This should have been seen in a wider perspective. Recently, the RBI too opted for recruiting short-term (for three years) executive interns on contract basis. The RBI has tried out most of the options like accelerated promotion, foreign postings, deputation to subsidiaries, assignment to higher quality training programme and paid holiday with family for its employees. As large disparities between the pay and perks in institutions with similar responsibilities across public/private sectors had not been appropriately addressed, the RBI’s new hiring scheme also did not attract talent.........

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RBI needs to come out clean on NPAs

............The RBI’s suggestion of a two-year “regulatory forbearance” for withdrawing the standard classification benefits needs an urgent recall. Notwithstanding this, the banks need to explicitly start recognizing these loans as NPAs as they have suffered considerable diminution in the realizable fair values of the securities assigned to cover them. They have necessarily to be recognized and also provided for entirely in the year of occurrence. It is certainly not correct to defer it to future years when the profits of subsequent years take the hit. The RBI shouldn’t venture into the realm of prudent and accepted international accounting practices by suggesting such deferrals.............

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Amid slowdown, Polaris aims to be among top 5 in financial tech

...........One of the biggest wins in India was with the Reserve Bank of India (RBI). Polaris’ end-to-end Intellect Core Banking System implementation at RBI includes system integration and maintenance of software for a period of 10 years and the deal is valued at $55 million........

Read - BS

Wipro gets core banking for NABARD banks

.....Considering that the recent regulatory reforms by RBI are expected to make the Indian banking scenario more competitive, this initiative will equip co-operative banks with cost effective technology and robust infrastructure to support their growth and help them keep pace. "More importantly it will change the face of rural banking by making e-banking facilities available to the rural customer," .........

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Coins worth crores of rupees are lying dormant in Mumbai's temples

Coins worth crores of rupees are lying dormant in huge hundis of Mumbai's over 5,000 temples, blocking coins' circulation as these hundis are opened every three to four months. This results in an artificial shortage of coins. To mitigate the shortage of coins, the Endowment dept of the Government should instruct temples to empty all their hundis once in a week and deposit coins in the bank for bringing it back into circulation. Maharashtra alone accounts for over 1.5- lakh temples, where coins worth Rs 20 crore are said to be lying dormant in hundis.

P S Shetty, Thane (West) - FPJ

Evergreen no more

......Last week’s recommendations show that the Reserve Bank of India is finally running out of patience. It needs banks to clear up these bad loans before they become a systemic problem. That, however, puts India in a tricky situation. Government-dictated targets – designed to fuel economic growth – are partly to blame for forcing the public sector banks to grow their books too fast in the first place. Now that the country’s economy is slowing, politicians will be pressuring banks to lend more, not less, and any restructuring that puts voters’ jobs at risk is bound to meet heavy resistance........

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Reserve Bank of India urges corporates to cut forex speculation

.......Large amounts of speculation by corporates had triggered huge moves in the Indian currency, prompting the central bank to impose curbs on foreign exchange derivative products, Reserve Bank of India Executive Director G. Padmanabhan said in a speech on Saturday that was published on the website on Monday. "The Reserve Bank believes that corporates should be concentrating more on their core business to generate returns rather than looking to generate alpha from diversifying into trading in forex markets," Padmanabhan said.......

Read - ET

When ‘animal spirits’ reigned

......Today, there are no ‘animal spirits’ to drive investments. With corporate profits, household incomes and government finances all under pressure, the domestic savings rate, too, has fallen. All this, even as the CAD has crossed 4 per cent of GDP. India, ironically perhaps, needs foreign capital more now than during its investment boom last decade! ........

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Loan recasts to get tougher for companies

..........More importantly, the RBI panel suggested to do away with regulatory forbearance regarding asset classification and provisioning in two years. If indeed that happens, banks have to make provisions for anywhere between 5% and 15% for any loan the moment it gets restructured. Currently, banks need to make a 2% provision on standard assets that they restructure, and a provision of up to 15% if the restructured loans turn bad. The provision requirement on restructured accounts should be increased to 5%, the panel said. RBI has sought feedback to the Mahapatra panel proposals until 21 August.......

Read - Mint

An SSC pass understands that inflation today has nothing to do with RBI

.....If you have a matriculation degree, you will understand that India’s inflation has got nothing to do with the RBI’s policies. Your inflation is largely international commodity price driven. Your local interest rate policies have got nothing to do with that. We have seen that inflation has remained stubbornly high no matter what Mint Street has done. You should have understood this one commonsensical thing,” .........

Read - DNA

Dr Subbarao, why give the economy an undeserved rate cut?

It’s no fun being Duvvuri Subbarao. Every month everyone looks to him to deliver interest rate cuts, and he is damned if he does, damned if he doesn’t................

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Growth ball in govt’s court, says RBI

The Reserve Bank of India (RBI) on Monday warned that patchy monsoons can knock up prices and trim farm sector and national income growth, obliquely hinting that the central bank was unlikely to cut interest rates. It complained of a cramped “monetary policy space” on the eve of its quarterly review........

Read - Hindustan Times

Which inflation is RBI targeting?

In the last one and a half months, a fierce debate is raging regarding the validity of RBI monetary policy actions against the backdrop of inflation numbers. RBI has given a new twist to this debate with the Governor recently espousing the need to develop a producer price index (PPI) and reiterating its position that increase in interest rates by RBI alone cannot explain the current investment slowdown. No prizes for guessing that we at Ficci would be on the other side of the debate. However, our endeavour in this piece is not to re-emphasise the relevance of a rate cut, but to open up a new area of debate by focusing on the rationality of the RBI policymaking............

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India's central bank set to hold interest rates steady

......"With upside risks to inflation, we believe that there is limited room for the RBI -- at this juncture -- to support growth through a cut in the repo rate,"......

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Economy is now at a critical juncture: RBI

....Economy is now at a critical juncture,” the RBI said, where revival can be supported by restoring confidence through policy actions to encourage investment. Maintaining that inflation is likely to be sticky during 2012-13, the RBI said, “Inflation and macro-risks will condition growth-enabling policy actions with a view to supporting recovery in a non-inflationary manner.”.......

 

Read - Indian Express

Losing momentum

A day before it makes its next monetary policy move, the Reserve Bank of India (RBI) has reiterated that the Indian economy continues to run into headwinds..........

Read - Mint

Time for surprises is over; Bet on no rate-cut: YES Bank

: So, status quo policy is what you expect. But the RBI has made very clear that it has little room to maneuver. To quote the RBI, “The fiscal and monetary space to stimulate the economy remains limited in the presence of an already large fiscal deficit and persistent inflation.” So, does the battle between the government and the RBI wage on?

A: Unfortunately, yes. This time the RBI has gone a step further and prescribed a revival of growth to the government, reiterating that a lot of confidence-building is to essentially come from government policy actions.....

Read and watch video...... 

RBI Warns of More Inflationary Pressures From Poor Rains

......Noting that the benefits from the declining global commodity prices were partly offset by the falling rupee, it said "the near-term inflation trajectory could remain sticky and conditioned by a number of risks that emanate from the unsatisfactory progress and distribution of the monsoons, higher MSPs announced for kharif crops and the impact of the exchange rate pass-through."  The report warned the path of inflation may also be impacted by the timing and magnitude of administered price revisions even though such adjustments have become necessary to reduce pressure on the medium-term inflation from expansionary fiscal policy........

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It’s up to New Delhi to fix the economy: RBI

Says interest rates can no longer be blamed for slowdown

The Reserve Bank of India (RBI) has painted a sombre picture of the economy because of government inaction on reforms and rising inflation. It has also put the onus of reviving growth on the government. For this, it has said, subsidies and expenditure have to be cut. Interest rates, RBI has said, are no longer the cause of the economy’s slowdown.....................

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Outlook for economy remains weak

....“Decisive policy action backed by credible commitment to a long-term strategy for correcting macroeconomic imbalances and stimulating investment is crucial at this stage to revive confidence as well as provide space for monetary policy to help sustain growth while keeping inflation under control,”.

Read - BS

Status quo hint in RBI text

......In an unequivocal message to Prime Minister Manmohan Singh, who now looks after the finance ministry, the RBI said the fiscal deficit target for 2012-13 was at a risk of being breached because of likely overshooting of subsidies and a shortfall in receipts. The central bank, therefore, asked the Centre to concentrate on setting its fiscal house in order by curtailing subsidies and significantly boosting government capital expenditure to provide an investment stimulus to the economy, which would help crowd-in private investment........

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RBI Must Stand Firm

.....Eventually, India's central bank will have to relent on decade-high interest rates to help boost the economy. The RBI surprised the market three months ago with a half-percentage-point cut. But there can surely be no surprises this time around...... 

Read - WSJ

Inflation a big worry, RBI says on policy eve

...... “The capacity of investment to respond to monetary policy actions to stimulate growth is conditional on an improvement in non-monetary factors that have impacted investment in the current cycle,” .........

Read - BS 

RBI Says India Inflation Risks Significant Even as Growth Slows

.....“The Reserve Bank is facing a dilemma on policy action in the current stagflation-type environment,”..........

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RBI macro survey sees FY13 GDP growth at 6.5%

........"Risks to inflation remain from unsatisfactory monsoon and increases in MSP even as growth slowdown eases demand pressures. While core inflationary pressures are currently muted, a continued rise in real wages may spill over to core inflation." While RBI did not indicate to cut rates amid the ongoing threat of high inflation rate, it fully recognised the threat of waning GDP growth that needs to be revived by lifting the investors' confidence............. 

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Public versus private

....The regulators have also decimated the profitability of various pieces of the financial services industry over the last few years and thus shrunk the profit pool for financial services. First we had Sebi go after the mutual funds and insurance sectors, destroying the manufacturer margins as well as severely denting the economics of third-party distribution. Then gold loans and microfinance came into the regulators’ cross-hairs, and their business models will have to be re-jigged. The whole capital markets piece is bleeding, with no signs of profitability — and the RBI has significantly tightened priority-sector norms, making these targets much harder to achieve without self-origination of assets. Thankfully the RBI seems to have pulled back on the new non-banking financial corporations’ priority sector and securitisation guidelines, or even that sector may have undergone a profit shock.......

Read - BS

Non-bank credit flow doubles

Flow of credit to the commercial sector from sources other than banks doubled in the first quarter of the current financial year, the Reserve Bank of India (RBI) said in the macroeconomic and monetary development report on Monday. While credit growth was in line with projection, it is expected to fall, the central bank said a day ahead of the first quarter monetary policy review. Bank credit grew by 17.4 per cent in mid-July 2012 from 16.8 per cent at end of March 2012. RBI had projected credit growth of 17 per cent for the current financial year. “Hence, credit growth is in line with the indicative trajectory of 17 per cent for the year. Anecdotal evidence from bankers suggests that there may be some deceleration ahead,” the report said..........

Read - BS

A reformer’s plight

......It is ironical that the original reformer Dr. Singh-led UPA-II Government has to be constantly reminded by none other than the Reserve Bank of India (RBI) on the need to keep “the fiscal house” in order. Control fiscal deficit, go for market-led fuel price so on and so forth. The governor of the central bank has been continuously pleading with fiscal mandarins, even as critical macro numbers (be it inflation or industrial output and trade figures) have begun to show disconcerting signs. Surprisingly, every one — from common man to the industry and the politician — has berated the RBI for playing the ‘spoilsport’ and painted it as a villain! ........

Read - The Hindu

Revive the idea of a Gold Bank - S.S.Tarapore

.......Is a Gold Bank feasible? An alternative approach would be to set up a Gold Bank, but the mere mention of a Gold Bank gives apoplexy to influential people. This was a seminal idea developed, in 1992, by S Venkitaramanan, the then Governor of the RBI and the proposal was incorporated in the Union Budget for February 1992. It is unfortunate that Machiavellian tactics were resorted to by some RBI officials to scuttle the proposal. Opponents of a Gold Bank -- and there are many even today -- argue that mobilising gold through Gold Bonds and using this gold to raise foreign currencies in international markets is neither feasible nor effective. Again, it is argued that if a Gold Bank were feasible, the private sector would have set up such a bank. Furthermore, it is felt that if such a bank is set up by public sector banks it would be a moribund bureaucratic institutions needing heavy subsidy from the government and the RBI......

Read - FPJ

Banking on gold

There is an understandably desperate tone to the Reserve Bank of India (RBI) Deputy Governor, Dr K. C. Chakrabarty's recent exhortations to the public against the practice of giving gold as dowry or as religious offering. It springs, perhaps, from the recent tendency of Indians moving away from parking their savings in financial instruments. During 2011-12, bank deposits grew by Rs 701,110 crore, which was less than the Rs 715,140 crore in the previous fiscal, notwithstanding interest rates being raised sharply on both time and savings deposits. Also notable is the fact that nominal incomes in the economy grew and the public propensity to save did not diminish in any significant manner........

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Treasure gold

In ‘‘A gold medal for Subbarao’’ (Business Line, July 27), the author mentions that the World Gold Council in 2011 refers to a domestic stock of 18,000 tonnes of gold in India. The RBI should persuade the Government to understand the significance of this treasure lying idle in the country, and put pressure on the powers that be to put at least some 10 per cent of this to productive use in the next five years. This will reduce the country’s gold import bill by 50 per cent. This can be achieved by:

Introducing gold-backed financial instruments which are not dependent on imported gold;

Bringing a portion of household gold stock by offering some instrument like ‘Gold Bond’, backed by government guarantee to return solid standard gold at the time of redemption, which could be, say, after 10 years and a small return in the interregnum;

Arrange for infrastructure, technology support and linkages for gold refining and certification facilities of international standard;

The RBI and the Government could consider even deficit financing for procurement of domestic gold as this could be the beginning for adopting a partial ‘Gold Standard’.

- M. G. Warrier Mumbai (HBL)

Muthoot Finance hit by RBI gold loan cap

The Reserve Bank of India’s (RBI) clamping down on gold loan companies by putting a cap on the loan-to-value (LTV) ratio has impacted the growth of Muthoot Finance, India’s largest gold loan company. For the first time, the company has seen its gold loan outstanding decline by 5% to ...............

Read - Hindustan Times

Coin traders' are taking advantage of the shortage

Newspapers advertisements ' Short Changed' by ' Jago Grahak Jago' launched by the Union Ministry of Consumer Affairs awakening people to insist on change instead of accepting candies and chocolates from shopkeepers due to coins shortage are a waste of public money. Instead, the Department of Consumer Affairs and Security Printing & Minting Corporation of India ( SPMCIL) should co- ordinate among themselves to ensure sufficient coins supply. Coins are being sold at high premium. These govt depts should co- ordinate with the RBI for the supply of coins and not allow these `` coin traders'' to flourish.

- Anshuman Gaikwad, Goregaon (FPJ)

Town Hall meeting with customers

Of RBI and Milton Friedman

........Such fiscal dominance has obviously been a problem. But the Indian policy world has to also recognize that India cannot maintain growth on a sustained basis as long as inflation continues to be in the double digits, one of the highest such rates in the world. It is time to listen more carefully to what Friedman said many decades ago............

Read - Mint

Inflation fears, government sluggishness to force RBI not to cut interest rates

Reserve Bank of India Governor Duvvuri Subbarao has tried his best to downplay expectations of an interest rate cut in an economy that has the toxic mixture of slowing growth and high inflation, but there are outside chances of a reduction if he decides that slumping global demand and turmoil in world markets could pull down local economic growth rates further..........

Read - ET

RBI and the drought factor

....... “However, both headline and retail inflation rates are rising, which have a bearing on inflation expectations. Future actions will depend on a continuing assessment of external and domestic developments that contribute to lowering inflation risks.” The unexpected development of a failed monsoon has only complicated this choice. So what will it be? Will RBI play to the gallery, or stay focused on battling inflation?...............

Read - Mint

Opportunity in despair

.......We face twin challenges as an economy. First, our growth rates are slowing down and the investment cycle has more or less broken down. Secondly, domestic consumption has led to inflation sustaining at over six per cent, which has led to RBI keeping interest rates high. Thus, the government needs to contain consumption and boost investments. Fiscal consolidation is imperative from the government to move the needle on the inflation front, to nudge RBI to start cutting interest rates. On the other hand, to kick-start the investment cycle, it would be critical to bring clarity on policy measures, especially for sectors like power, telecom and mining. This would make investors feel comfortable that after having invested/or committing significant capital, policies are stable enough for them to earn reasonable returns.......

Read - BS

Coping with the unknowns

The central bank is likely to wait for an end to policy paralysis - just like everyone else

......In the circumstances, does the RBI hike rates (and/or CRR), stay put, or cut? A hike is very unlikely. Cuts, if they happen, are likely to be nominal. Though the RBI can do nothing about food prices, it could be arm-twisted to keep rates high due to monsoon failure.......

Read - BS

RBI’s choices in an inflationary vortex

.....On its part, the Reserve Bank of India (RBI) has made it clear that administered prices of petroleum products must be increased to reflect their international prices. Even if it results in higher overall inflation, such increases are imperative to lower the demand side inflationary pressures created by excessive fiscal expansion. In reality, it is most likely that fuel price revision, especially for diesel, will take place in the coming weeks and WPI inflation will, consequently, rise. How should the monetary policy react then? ........

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The great RBI dilemma: To cut key rates or not

The Reserve Bank of India will make known whether it has opted for monetary easing and benchmark rate cut tomorrow when it announces the quarterly review of its monetary policy. A complex macroeconomic scene and contradictory signals from economic parameters that the RBI monitors regularly have made the rate cut decision tricky..............

Read - DNA

Expect the unexpected from the RBI

......The market is looking at the wrong set of figures in not expecting rate cuts. The central bank is likely to look at the broad macro environment on the domestic and global front and cut the repo rate by 50 bps even as it lowers the GDP growth forecast to 6.5% levels from initial April forecasts of 7.5%. A repo rate cut of 50 bps will bring it down to 7.5% from 8% and at this level, it will be around average inflation expectations of 7% to 7.5% for full year 2012-13. An economy that is slowing considerably from growth rates of 8.4% seen in 2010-11 to 6.5% for 2011-12 and 2012-13 can live with negative real interest rates......

Read - DNA

Guessing game on RBI rates

Mixed views abound on whether RBI governor Duvvuri Subbarao will spring a pleasant surprise in the form of a rate cut during Tuesday’s first-quarter monetary policy review. Many feel that the Reserve Bank will maintain a status quo on key monetary policy rates because there has been no significant moderation in inflation. However, a few believe that the RBI may bring down the cash reserve ratio (CRR) to address the economic slowdown, which is continuing to weigh on corporate performance. The optimists also believe that the apex bank’s guidance will be much less hawkish..........

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All eyes on RBI guv: will he cut rates tomorrow?

Home loan borrowers, business leaders, economists and policy makers: all seem to have one question in common: Will the Reserve Bank of India (RBI) governor D Subbarao announce a cut in interest rates on Tuesday?.............. 

Read - Hindustan Times

Mobile banking deals treble to Rs 286 cr in May

........"Even though the value and volume are increasing on month on month basis, the growth rate is low when compared with the number of bank accounts and the vast mobile subscriber base of more than 900 million," said Harun R Khan, Deputy Governor, RBI in a speech on Financial Inclusion recently. This indicates that banks are yet to fully exploit this technology even for their existing customers, he said adding that RBI has provided policy framework for a collaborative relationship between banks and mobile network operators...........

Read - BS

Over Rs 2,400 crore lying in inoperative bank accounts: RBI

........According to RBI, there should not be any charge for activation of an inoperative account and the bank's interest on savings accounts should be credited on regular basis whether the account is operative or not. If a fixed deposit receipt matures and proceeds are unpaid, the amount left unclaimed with the bank will attract savings bank rate of interest, the RBI told activist Subhash Agrawal in response to his RTI query...........

 

Read - BS

RBI submits affidavit on Andhra MFI act

....."NBFCs being regulated simultaneously by RBI and State Government will result in dual regulation thereby adversely affecting the functioning of the NBFC-MFIs and the interest of the public," RBI said in an affidavit filed in the court. This was in response to a writ petition filed by some MFIs questioning the legal validity of AP MFI Act. "In case of NBFCs the RBI has exclusive power to regulate and supervise them. The provisions of the impugned Act are ultra virus the constitution of India so far as it deals with NBFCs," it added.......

Read - BS

.......In its first formal submission on the controversial issue last week, the RBI has told the Andhra Pradesh High Court that "any overlap or conflict is not in the interest of effective regulation, both from the point of view of the regulators and the regulated entities".........

Read - ET

Extending RTI Act to public sector banks involves systemic risk - M.R.Umarji

.....Public sector banks established under an Act of Parliament are owned and controlled by the central government, but carry on this business of banking by raising deposits from the public. They are not dependent on any budgetary allocations for their businesses. Although these banks collect public deposits, they are accountable to the RBI and not to the public for prudent use of such deposits. Ordinary citizens seeking any information from these public sector banks are incapable of making any assessment on whether the banks are utilising the public deposits prudently and hence the basic objective of the RTI Act to make public authorities accountable to the public for use of public funds is not applicable to public sector banks. .......

Read - ET

ATM transaction charges may be lowered soon

........... in a meeting on 26 July of all banks and representatives from the National Payments Corporation of India and the Reserve Bank of India, it was decided to bring down the transaction charges gradually. “For the time being, it has been decided to bring down the rates in phases. First bring it down to Rs15 for withdrawal and Rs. 5 for balance enquiry from 1 August. And then reduce rates gradually in a 5-6 months horizon instead of drastically bringing it down in one shot,”..........

Read - Mint

How much of the capex slowdown is due to RBI tightening?

 “The Reserve Bank maintains that interest cost is only one of the several factors that have dampened growth, and the increase in policy rate by the Reserve Bank alone cannot explain the investment slow down.” This defensiveness is a bit odd—isn’t slowing growth and demand in the economy the whole point of raising rates? And if there are other factors holding back growth, shouldn’t the central bank take account of them and adjust its monetary stance accordingly?.........

Read - Mint

If not as IIMA chief, Barua ok being a faculty

Ahmedabad: As Prof Samir Barua’s term of directorship at one of the world’s best B-school comes to an end in October, speculations are rife about his plans to settle down for a bigger role in Reserve Bank of India (RBI) and Securities and Exchange Board of India (Sebi). However, putting a lid over all rumours, Barua said that he intends to return to IIMA’s classrooms as a faculty member. This possibility is likely, if he doesn’t get a second term as the director of IIMA, he added.

The Daily Bhaskar

'CCI will not intervene in functioning of sectoral regulators'

Competition watchdog CCI will not put road blocks in the functioning of other regulators like TRAI and the RBI, but will only intervene if the policy decisions hamper competition in the market...........

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Norms on anvil for proper use of for CPSEs' surplus cash

........The Reserve Bank of India (RBI), Securities and Exchange Board of India (SEBI), UTI Mutual Funds and SBI Mutual Funds have made presentations to the committee in regard to investment of surplus funds by CPSEs. The RBI has suggested to the panel various investment options such as mutual funds and government securities wherein these PSUs can invest their money, the official said..........

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Reviving investment is key to boost growth: Bimal Jalan

In an interview to CNBC-TV18, Bimal Jalan, former RBI Governor, speaks on RBIs restructured assets report, where RBI wants to stop the practice of restructuring a loan just to keep it from being classified as a non-performing loan (NPL).  Adding that the economic situation is undoubtedly worrisome, Jalan feels that reviving investment is the key. ...........

Read and watch video........ 

Rebuilding a Stronger Microfinance Sector in India

The central government has now stepped in. The Microfinance Institutions (Development and Regulation) Bill, 2012 puts the Reserve Bank of India firmly in control of the sector. Vijay Mahajan, the president of the Microfinance Institutions Network of India and also the founder and chairman of the Basix social enterprise group talked to India Knowledge@Wharton about the implications of the new bill and the way ahead for the sector.........................

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FinMin asks PSU banks to reform board meetings

.....“Issues relating to business strategy and operations should be discussed at the board once a quarter. What is happening now is a lot of time goes into reporting items prescribed by the Reserve Bank of India (RBI),” ...........

Read - BS

My View on "Yaga Venugopal Reddy set to head 14th Finance Commission...":

These days, when every move of the government and political leadership is justifiably viewed with suspicion, may be because of the presence of people like Manmohan Singh and Dr C Rangarajan and several other right-thinking veterans in Delhi (who survive there as others are not interested in hard work!), some decisions stand out giving hope that all is not lost yet. The choice of Dr Y V Reddy for this job is one such instance. He will have a tough time balancing pulls and pushes of a multi-dimensional nature. But he will face all those with his disarming smile and quickly do the right thing at the appropriate time. This Finance Commission will have the responsibility of giving a direction not only about ensuring distributive justice in allocation of resources but also making the economy move forward from the present stalemate. Congratulations to Dr Reddy !

- M G Warrier

‘Kidnap’ complaint hits efforts to weed out loan recovery evils in West Bengal

.....Another agency owner argues: "The last major such incident in Kolkata was in 2007. Since then, prodded by the RBI and the banks, a rigid system has been put in place to weed out such incidents. To be fair, in the five years since, nothing happened."........

Read - TOI 

The colour of money

It may not take a century for villages in India to get banks, and villagers to own accounts. Madhya Pradesh is paving the way for financial inclusion. The state is suddenly full of excitement about what it considers is a feat. Its rural development department has hired publicity agents to spread the word that every villager in the state would have an account by August 15. This is the result of a change in strategy, according to the officials of the state government...........

Read - BS

Unpractical ‘short-changed’ advertisement by union ministry of consumer affairs

.... It refers to advertisements entitled ‘short changed’ in all the newspapers on 27.07.2012 by helpline-website ‘jago grahak jago’ launched by union ministry of consumer affairs awakening people to insist on change instead of unwanted items like candies usually given by shopkeepers due to usual shortage of coins. Instead of wasting public-money on such unpractical advertisements, various concerned wings of union government namely department of consumer affairs and security printing & minting corporation of india limited (spmcil) should first co-ordinate amongst themselves to ensure sufficient supply of coins especially in denominations of rupees one and five which are presently ‘sold’ at high premium in ‘coin-markets’........

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UP asks banks to be especially alert on fake Indian currency

.........The minister also accepted that cases of fake notes from bank ATMs have also come to the light and added that suggestions have been given to the RBI for not allowing money into ATMs manually and deploy guards there after their character verification.........

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Fake Indian currency a threat to country

Lucknow, Jul 25: Cirulation of fake Indian Currency Notes (FICN) and other counterfeit items is a major problem in Uttar Pradesh which could be a terrorist and economic threat for the country, several speakers at a FICCI- CASCADE seminar maintained here today. Speaking at the seminar titled ‘Curbing Counterfeiting and Smuggling – An Imperative for Indian Economy’ as the chief guest, Uttar Pradesh Commissioner Customs Ajay Dixit maintained that the smuggling of counterfeit currency was widely prevalent in the country due to its porous international borders with Nepal and Bangladesh. Dixit quoting RBI statistics, said...............

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Where have all the coins gone?

......An examination of the scarcity of coins in various parts of the country might offer a bigger picture. Earlier this year, the RBI had decided to back out from retail operations and hence halted their distribution of coins from its offices. But there are allegations of procedural inexperience of the present distributors, which has further resulted in the rising price of coin and an uneven demand-supply ratio. Inadvertently this is affecting the economy very badly. Let’s do a simple math. Suppose in Manipur, a one person loses Rs 3 a day while shopping; then the state loses Rs 81,65,268 daily, if we take into account the present population of 27,21,756 as per the 2011 census. Needless to say, some economists measure the shortage of coins is adding to 3% to 5% inflation in the national economy.........

Read - The Sangai Express, Manipur

State opts for e-payment from August 1

BHUBANESWAR: The state government will launch the new system of electronic disbursement of government payments from August 1. The new system, which is being launched in collaboration with the Reserve Bank of India (RBI), aims to benefit government employees, vendors, suppliers and other payees and ensure transparency in all financial transactions and accelerating the pace of payment.......

Read - TOI

Foreign banks expand presence outside large cities

.........The Reserve Bank of India (RBI) has not allowed large foreign banks to open branches in metropolitan cities in the past five years. This has resulted in places such as Proddatur, Nandyal and Nanded getting foreign bank branches. “RBI does not appreciate the idea of large foreign banks having more branches in metro cities,” said a top executive of a large foreign bank who did not wish to be named. “There are no guidelines or written communication. But they have made it very clear that they want foreign banks to expand into deeper geographies.”...............

Read - BS

Private banks' value two times PSUs'

India’s banking system has its pockets of excellence and pockets of incompetence, and everything in-between. The regulator, RBI, does a reasonable job but there is also a fair amount of political interference. Commercial interest rates are set by banks themselves, and policy rates, cash reserve ratios (CRR), sector lending limits and sectoral risk-weights are set by the RBI..................

Read - BS

Regulation and supervision of MIVs: An urgent task for central banks and regulators globally

......In fact, during the Indian microfinance crisis, I realized that India’s central bank (Reserve Bank of India) perhaps did not have (in one place) all the requisite information with regard to foreign equity and debt flow into the Indian microfinance sector. And as I have previously mentioned, (and as Mix Market has so eloquently put it), it is the unique combination of significant equity flows (and debt funds) from abroad with local banking funds and their subsequent and continuous investment as “microfinance loan assets” that created the perfect storm for the Indian microfinance crisis. It is precisely this that regulators have to guard against globally.........

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Indian central bank in focus again

.....The RBI, which believes monetary tinkering is not the prescription to deal with the gloom hanging over the nearly $2 trillion economy, is unlikely to stray from its stated policy. It is more concerned with price pressures that are bursting at the seams, especially for food items that are driven by supply-side bottlenecks. Fuel prices, kept artificially low by unsustainable government subsidies, are another time-bomb the RBI is worried about...........

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India's mid-summer nightmare

........Eventually, high food inflation hits the overall economy and prompts the Reserve Bank of India to raise interest rates to suppress prices. Currently, high interest rates have made borrowing costlier for firms, which do much of their business on short-term loans. "There are blunt instruments which can bring down inflation but also dampen growth. But we don't have a consensus on how much of dampening of growth is acceptable to bring down inflation," Kaushik Basu, India's chief economic advisor, said.......

Read - Hindustan Times

SBI's Chaudhuri says liquidity situation still tight, ICICI's Kochhar differs

New Delhi: State Bank of India Chairman Pratip Chaudhuri has said that there is a strong case for the central bank to cut the cash reserve ratio in the forthcoming monetary policy review as the liquidity situation is still tight, contrasting the state-run bank's top private sector rival ICICI Bank's view that cash flow in the banking system is comfortable............

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Yaga Venugopal Reddy set to head 14th Finance Commission; Parthasarathy Shome, R Gopalan too in panel

NEW DELHI: The former Governor of the Reserve Bank of India, Yaga Venugopal Reddy, is set to head the Finance Commission, the constitutional body which has the mandate to finalise the distribution of tax proceeds between the central government and states..................

 

Read - ET

“The First Mile Walk into the Financial System”

Financial Inclusion has been a priority area for the Government in propelling inclusive growth. Plans, policies and programs are undertaken to drive the agenda of financial inclusion and integrate every common citizen of India in the fold of formal financial system of the Country. The Reserve Bank of India approach is driven by a bank led model supported with ICT and BCs. RBI has also taken steps in opening No-frills accounts, relaxing KYC norms, deregulation of pricing, promoting SHG bank linkage model and many more................

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Theme Address:
Dr K C Chakrabarty, Deputy Governor, Reserve Bank of India on August 7, 2012

Microfinance Regulation: The Emerging Landscape 
Mr Anand Sinha, Deputy Governor, RBI

HDFC Bank conducted a ‘Coin Mela’ in Lucknow

HDFC Bank, second largest private bank in the country, organized a ‘Coin Mela’ at Hazratganj Branch in Lucknow, today. The Coin mela was inaugurated by Dr. Rabi Mishra, Regional Director, Reserve Bank of India, Lucknow. The mela was organized to support RBI Clean note policy and program on financial awareness............

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What ails the New Pension Scheme?

..... It is unfortunate that without resolving the problems of acceptable returns, adequacy of the product as a substitute for a time-tested social security instrument (Defined Benefit Pension Scheme) and acceptance at the beneficiary level, the Centre is trying to impose the NPS on states (which have a stake in the coalition at the Centre) and autonomous institutions like RBI and PSUs, including public sector banks.........

- M.G.Warrier (former General Manager of the Reserve Bank of India)

 

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RBI, bank officials depose in Paazee forex scam

 ........On Thursday, Savithri Ramani, Assistant General Manager of RBI — Chennai (Foreign Exchange Division) appeared before the judge and in her deposition, the official said that any firm operating as non-banking finance company or involved in foreign exchange trading should register their names and obtain a licence..................

Read - The Hindu

Govt's overspending restraining effectiveness of monetary policy: RBI

....."Prudent anti-inflation policy includes containment of the deficit. It is insufficient to announce and maintain restrictive monetary policies unless accompanied by a coordinated reduction in the budget deficits," a RBI working paper titled, "Fiscal Stance, Credibility and Inflation Persistence in India", said Thursday..................

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RBI paper finds monetary policy undermined by unsustainable deficits

A working paper, published by the Reserve Bank of India (RBI) on July 26, studies the reasons behind high inflation in India despite tightening of monetary policy, suggesting the presence of a large government debt burden undermines the central bank's credibility...........

Read - Central Banking

Sensex gains private banks lead

....Europe, government action, and The Reserve Bank of India (RBI) Policy are important, and in that order for the market,” he added. “Everybody is waiting for animal spirits to come in, but nothing has happened so far on that front”........

Read - BS

Public sector banks - Loans turning bad

.....Until 2001, these restructured accounts were considered NPAs, but to provide reprieve to banks and borrowers, the Reserve Bank of India (RBI) magnanimously took a decision to permit these loans to be treated as standard so long as they were rescheduled before becoming NPAs. Banks were allowed to do this if they considered the projects to be viable and believed that the cash flow problems faced by these borrowers were temporary. This amounted to the regulator’s nod to ‘ever-greening’ of loans and officially postpone the problem. More often than not, a sizeable chunk of these loans becomes non-performing—RBI officials themselves concede that 15% of restructured assets become bad debts........

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A clean-up act

......if the panel appointed by the RBI recommends to banks to make all restructured accounts into NPAs immediately, the entire banking industry will be in the doldrums. ............

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RBI may refrain from rate cuts

.....From a central bank’s perspective, it is unfortunate that slowing growth is being accompanied by stubborn inflation. However, this unpleasant outcome and the prevalent macro pressures should be traced to the high fiscal deficit being run by the government. Thus, we are following a sub-optimal policy mix, which cannot be corrected unless the government decisively cuts the fiscal deficit and puts the country back on the path of fiscal consolidation. Till that time, RBI may have no choice but to refrain from cutting rates. The central bank can, perhaps, point to the fact that it has already done its bit for the economy with the April rate cut and a proactive liquidity management strategy.........

Read - Mint

Time to hike rates?

......Though the usual lot of finance professionals have made a case for keeping rates unchanged, so far none have suggested RBI raise policy rates to deal with the likely surge in food prices. Perhaps they should take their advice to its logical conclusion!

Read - FE

Global economy to determine RBI stance

....A tough stance by RBI on the rate front can be justified on a number of counts: suppressed inflation in view of the possible decontrol of diesel prices, the need to anchor real rates in view of the high inflation numbers so that depositors are not discouraged to save, depreciation of the rupee which amounts to monetary easing, and lack of resolve on part of the Government in reducing subsidies on fuel and fertiliser.........

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Why Subbarao may not be willing to surprise just yet

.....Having made it clear that the slowdown wasn’t linked to rates, the central bank will now have to be convinced by clear steps from New Delhi before the central bank is expected to do its bit again. It’s not a happy mix for Subbarao just now. The much-required diesel price hike is uncertain, big-ticket reform items are still stuck in political muscle-flexing and confusion and globally, there are chances that stimulus packages may drive up commodity prices again. Reason enough for the RBI to keep the finger on that pause button.........

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Inflation clouds loom large

Just a few days before the monetary policy announcement for the first quarter of 2012-2013, the Reserve Bank of India Governor D. Subbarao chose to talk about the centrality of inflation. The occasion was the launch of the collected writings of one of his illustrious predecessors, the late I.G. Patel. He quoted Patel, saying that the supreme test of monetary policy was its ability to check inflation without hurting growth. Notice the sequence. Implicit in this formulation (Patel’s, not Subbarao’s) is that inflation control is the objective, and not hurting growth is the constraint. You can’t switch the objective and the constraint. Of course, there is no such single objective mandate given to the RBI. But the RBI watchers would be deluding themselves if they don’t attach a higher weight to inflation control in the RBI’s current priorities............

Read - Mint

Pratip Chaudhuri, SBI chief makes case for a 50 bps cut in rates

Chairman of State Bank of India, Pratip Chaudhuri, said that the bank will pass on the benefits of lower rates only if the Reserve Bank of India cut cash reserve ratio (CRR) in the forthcoming policy. "There is a case for a 50 basis points in CRR," said Mr Chaudhuri. "If CRR is not cut there is no benefit for the banks and no benefits means nothing can be passed on to the borrowers,".....

Read - ET

Navigating choppy waters - Suman Bery

......If Dr Reddy is indeed appointed chair of the Fourteenth Finance Commission, as has been recently trailed in this newspaper, it is likely that these rather severe views will find expression in the work of that body. In contrast to this forceful expression of the normative framework for fiscal policy, I do not recall his articulating any equally emphatic doctrine for monetary policy. His main lament was that in recent years Indian inflation had moved from being on average below that of other emerging markets to on average being at the top of the heap. Unkind observers might argue that this is what happens when a central bank is given unlimited discretion and is not bound by a formal commitment to the government or to Parliament. We know that both Dr Reddy and his successor have spurned inflation targeting as inappropriate for India, including its less formal version, the “low inflation goal” proposed by the Raghuram Rajan committee’s report on the financial sector. The lack of an explicit nominal anchor may also have complicated the Reserve Bank’s efforts to guide the exchange rate in an orderly way in recent weeks...........

Read - BS

A gold medal for Subbarao - S S Tarapore

The RBI Governor has done well to pick up 200 tonnes of gold in 2009. It would be prudent for the RBI to step up the gold proportion to 33 per cent of total reserves, from 9 per cent

.......Dr Subbarao has already earned his place in the firmament of the RBI by his percipient picking up of 200 tonnes of gold in 2009. If he leads India into the Golden Age, he would rightfully become Zeus in the RBI’s Pantheon of Governors. With the 2012 London Olympics, Dr Subbarao, a reputed marathon runner, should “go for gold”!.......

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RBI’s sovereign debt management can help monetary policy

There is no conflict of interest in the Reserve Bank of India managing government borrowings and it does not lead to rate manipulation in favour of the Centre, a research paper by the RBI has said. "We feel there might be a confluence of interest between sovereign debt management and monetary policy, both helping each other, especially in extraordinary circumstances such as the recent global crisis ," said the research paper, jointly authored by Sunil Kumar and NRVVMK Rajendra Kumar of RBI's Internal Debt  Management Department...................

Read - ET

Kolkata historians want India to claim 48 tons of silver recovered from World War II shipwreck

......The assets recovered were being taken from the British-ruled city Calcutta, now Kolkata, which was an Indian territory. I think the Indians should have a say to find out whether it was public capital or private capital. If it was public capital then the state must play a role," historian CR Panda, a former director of Calcutta's Indian museum, told MAIL TODAY. Panda said the finance ministry, Reserve Bank of India (RBI), ministry of external affairs and law must step in to look into the international legal parameters of the recovered items if they want to lay any claims...........

Read - India Today

Why RBI’s Chakrabarty is Wrong About Indians

.......The increasing demand for gold reflects the public’s lack of faith in the Indian economy. The current account deficit that Chakrabarty worries about would not have been so wide had the government taken a single decision of letting fuel suppliers charge customers at least what it costs them to buy oil. Chakrabarty has unfairly blamed the public for India’s economic woes.The root cause of India’s precarious finances, both internal and external, is the government’s inept and callous management of the economy. Not the average Indian’s instinct for self-preservation.

Read - Forbes India

RBI to get FSA support in supervision of UK banks

New Delhi British financial sector regulator FSA has entered into a fresh agreement with the RBI for mutual assistance and information exchange in supervision of banks operating in both the countries......

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Co-op bank staff to get a salary hike

.....Recommendations have been forwarded to all the co-operative banks and 95 per cent of them have agreed ,” Patil said. On July 27, a delegation will meet the Reserve Bank of India governor to urge him to implement the Malegaon Committee report,........

Read - Deccan Herald

Coming clean on NPAs

......There is little to be gained from making fine distinctions between NPAs and ‘restructured loans’ that merely obfuscate the underlying problem of bad debts. The panel under the RBI Executive Director, Mr B. Mahapatra, has correctly observed that restructuring of a bank account amounts to an “event of impairment”, whether or not its asset classification undergoes a downgrade. Since international accounting standards and regulations followed in advanced economies treat any restructured bank account as impaired, there is no reason for India not aligning its prudential guidelines with the global best practices.........

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Regulator for cement industry sought

......The Builders’ Association of India (BAI) has called for an independent regulator for the cement industry in view of the recent developments in the sector. The body should be a quasi-judicial authority and modelled along the lines of Reserve Bank of India (RBI), Securities and Exchange Board of India (SEBI) and Insurance Regulatory and Development Authority (IRDA),.........

Read - The Hindu

High interest rates adding to inflation: Assocham

NEW DELHI: High interest rates are adding to the headline inflation and are "defeating" the Reserve Bank's objective of checking rising prices through a tight monetary policy, a study by Assocham said ........

Read - ET

It's not the RBI

After pointing out that “the primary responsibility for changing the mood belongs to the Union government...”, your editorial suggests that the Reserve Bank of India (RBI) lower interest rates to spur growth (“Worries over growth”, July 26). Not only is this view one-sided in that it ignores the government’s role, but it also assumes that high interest rates are the chief cause of declining growth. As Sajjid Chinoy pointed out in Business Standard (“Don’t put the cart before the horse”, July 25), our declining growth trajectory is the result of low investments caused by government policy (or lack thereof) and supply-side bottlenecks, for which the RBI is not responsible, nor does it control them. Tellingly, this view was endorsed by Indian businesses in a recent Crisil survey.

- R Sankar Delhi

A glass half full ... or half empty?

In the annual policy meet on April 17, the Reserve Bank of India surprised the market with a 50-basis point cut in the repo rate. However, in the next policy meeting on June 18, the central bank governor, D Subbarao, delivered a shocker by not only holding rates but also with his hawkish statement - that inflation was too high to cut rate. Ahead of the first quarter policy review on July 31, Business Standard takes a look at how the parameters that decide monetary policy actions changed in the last three months.......

Read - BS

Redefining inflation

.....The RBI Governor has spoken about inflation as a regressive tax that hits the poor. Nowhere is the impact felt more than in the case of food prices. He would do the economy a service if he administered a bold and healthy shock to the system and its expectations by saying that core inflation would be redefined to refer to only food and fuel prices. Of course, that does not mean that the rest of the prices will be ignored.

Read - BS

July policy a close call rate cuts to follow

........While the timing of further monetary easing remains uncertain, I expect cumulatively 150-basis points (bps) of rate cuts during 2012-13 (including 50 basis points delivered in April). RBI action next week remains a very close call; I maintain a bias for a 25-bp cut in the repo rate. Importantly, the government’s ability to marshal a fuel price rise in the near term remains a key event, as that would be seen as the first initiative (even if token) to tighten the fiscal belt.......

Read - BS

No reason for RBI to cut rates next week: HSBC

......."With below-normal monsoon and little policy action from Delhi, the Reserve Bank is likely to keep rates unchanged next week. The fiscal stance remains to loose for comfort and elevated inflation expectations are a concern,".........

Read - ET 

Great steps for banks to check money-launderers

..... Post India's membership to the Financial Action Task Force (FATF), the focus on anti-money-laundering (AML) initiatives has increased. Further, the RBI has issued various guidelines to banks on reporting fraud and on the implementation of robust fraud detection and prevention systems. In particular, as Web banking expands from Web and file transfer to mobile/smartphone and social media channels, the RBI recommends taking an integrated multi-channel approach to information, transactions and fraud, in order to lower costs and increase effectiveness. It is imperative for financial institutions to deploy a comprehensive, cost-effective solution that is able to identify, detect and prevent attacks across multiple channels in real time............

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Banks brace for high borrowings, as spectre of drought looms large

.....The Reserve Bank of India has already notified that states would be raising Rs 40,000 crore by way of borrowings till September end. State government borrowings or state development loans are sovereign guaranteed borrowings in a clear indication that borrowing requirements would be large. During the corresponding period of last year when monsoon rainfall was favourable borrowing in the second quarter of the year was Rs 29,000 crore.......

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Revised RBI norms: Banks may find it tough to meet indirect agriculture lending target

Achieving the indirect agriculture lending target under the revised Reserve Bank of India guidelines on priority sector lending may prove to be an uphill task for banks.......

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RBI to amend norms governing NBFC-MFIs

.........Following feedback received from stakeholders, the RBI will amend some directions governing MFIs, said Mr P. Vijaya Bhaskar, Executive Director, RBI, at a seminar organised by the Microfinance Institutions Network (MFIN). The directions were issued last December. Mr Vijaya Bhaskar assured the MFI representatives that their institutions were an integral part of the RBI’s financial inclusion programme.......

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Guidelines on investments of surplus funds by CPSE's soon

.....The Reserve Bank of India (RBI), Securities and Exchange Board of India (SEBI), UTI Mutual Funds and SBI Mutual Funds have made presentations to the committee in regard to investment of surplus funds by CPSEs. The RBI has suggested to the panel various investment options such as mutual funds and government securities wherein these PSUs can invest their money, the official said......

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Yet another blow for Indian banks?

......In order to prudently recognise the inherent risks in existing assets classified as standard on restructuring, an RBI working group has called for additional provisioning on these assets. It states that the provision requirement on such existing accounts should be increased from the present 2% to 5% in a phased manner over a two-year period. Thus provision will be increased to 3.5% in the first year and 5% in the second year. However, in cases of new restructuring of standard asset, the working group recommends that a 5% provision should be made with immediate effect. If this move is implemented, state run banks will see a strain in profits, while private sector banks will be relatively sheltered.......

Read - MSN News 

Mobile security for Andriod users

.......It further added that there has been an increase in mobile banking. According to the Reserve Bank of India (RBI), banking through mobiles increased five-fold to Rs 1,140.6 crore between January and May compared with the same period a year ago. These trends are driving the need for mobile security measures to protect information for enterprises, businesses and small and medium businesses (SMB)..........

Read - TOI