Happy new year 2012.....................

A day in CAB – presented at 31st night................

Conceptualised, written and directed by Shri Ravi Sangvai, DGM/MOF, the children of CAB officers dramatised their views on “A day in CAB” on the eve of bidding adieu to 2011 at the dinner party hosted by Reserve Bank Officers’ Association of Pune unit. The children persuade the Principal, CAB to allow them to run CAB for a day..... and then they take over full control to funtastically present the show, was the tiny theme. Ms. Kamala Rajan, Principal, CAB sponsored gifts to all the children. Shri Allen C A Pereira, Director, NIBM was invited by the Association as guest. Shri Manas Ranjan Mohanty, Secretary, a force behind arranging the event and Smt Ramakumari, MOF conducted a quiz programme for the children. Shri Nitin Desai, Manager (Rajbhasha) took over the stage to manage Tambola. S/Shri Mangesh Tarambale, President and Sarvesh Singh, Treasurer of the Association co-ordinated the Food Plaza.  The coming together of the members of the Reserve Bank Officers’ Association (Pune Unit) alongwith the spouse and kids will certainly carry sweet memories of the past while stepping in 2012 !!!!      

Whose parking area is it anyway?

THIRUVANANTHAPURAM: For the past few days, a portion of the parking bays under the flyover at Bakery junction is being used exclusively by the Reserve Bank of India. This has become a cause of worry for motorists who had been parking in the area. Authorities say the arrangement is based on an agreement with the RBI in 2003. After the flyover was inaugurated last year, the large space underneath it was earmarked for vehicle parking with exclusive bays earmarked for cars and bikes. This plan was a relief for the motorists visiting the area. But things have changed. "The RBI had given their land for constructing the flyover at the Bakery junction. The government had earlier agreed to hand over a portion of the land underneath the flyover to the RBI in exchange for the land acquired", said vice-president of Trivandrum Road Development Company Limited (TRDCL) Anil Kumar Pandala. But not many are ready to buy this argument. "In that case will the authorities provide parking space to all those who give their land for public purpose?" asks Aneesh Kumar, a motorist who is a frequest visitor to the area.  The authorities say that had the trade-off agreement with the RBI not been made, the flyover would not have become a reality. "It was only because of this agreement that the flyover became a reality. They gave their land even compromising their security concerns", Pandala told TOI.  Though the original idea was to landscape the area beneath the flyover with plants and lawns to prevent encroachment, it was later decided to use this area for parking purpose.  Meanwhile, the Public Works Department officials say they are unaware of any such agreement between the RBI and the TRDCL, the concessionaire of the City Road Improvement Project (CRIP). "We are not aware of this matter. We will discuss the matter with TRDCL officials and sort it out", PWD secretary Manoj Joshi told TOI.  Built on 13 concrete piers, the 510-metre-long flyover has an 11-metre-wide carriage-way with concrete crash barriers on both sides. The 14-span bridge is exclusively for vehicles and out of bounds for pedestrians connecting Palayam junction and Thampanoor.

TOI

Rs 1000 note costs govt Rs 3.17 to print

MUMBAI: It costs money to make money. Last year, the Reserve Bank of India spent Rs 2,376 crore on printing 16.5 billion currency notes of varied denominations and the tab is only set to rise.  Of all the notes minted, Rs 1,000 costs the least, at Rs 3.17 per note. But the five-rupee note, the smallest in terms of size and denomination, costs the most, 48 paise, compared to the value of the note.  The number of notes printed has risen consistently. "Inflation remained high, often in double digits, in respect of commodities such as foodgrain, pulses, fruits and vegetables, and milk during 2009-10 and 2010-11 - where transactions are expected to be cash- intensive," the RBI said in its annual report for 2010-11. The size of our currency notes has shrunk over time, probably because of the rising cost of paper. Yet, we maintain different dimensions and colours for different denominations," said Dilip Rajgor, scholar and the author of several books on numismatics. 

TOI

Life of Indian notes small

MUMBAI: The Indian currency notes have come a long way from the 1800s when the Presidency banks maintained their own colour schemes and minted them for the state they had jurisdictional control over. The government stripped their right to issue notes after passing the Paper Currency Act, 1861. From 1862 to 1935, India had single-coloured and unifaced notes, or bills printed on one side.  Now, a lot more thought goes into the designing. "Even the visually challenged were brought on board. The varied size of the notes and the different shapes on the intaglio help them differentiate between the bills," said an RBI officer. There have been some bloopers too, the recent being the resemblance between the Rs 100 and the Rs 500 notes that forced the RBI to redesign the latter. But that slip also confirmed the apex bank's worst fears: Indians did not read the denomination on the currency, a habit that the RBI had inadvertently inculcated among the citizenry.  Yet, officers at the RBI will insist that their record of redesigning notes, an exercise they take up every five years, is still free of a large aesthetic scandal.  "The entire machinery and logistics for currency in India is the largest after China," added the RBI officer. It is probably so because the life of notes is a tad shorter than that in many other parts of the world.  US' Federal Reserve reports the average life of $20 notes as two years, $50 notes five years and $100 notes 10 years, on an average. In India, notes of smaller denomination like Rs 5, which circulate more than those of higher denomination, have a life of less than a year. A Rs-10 note lasts for about two years before it is 'soiled', while a Rs 100 bill stays around for about 3-4 years. The high-value Rs 500 and Rs 1,000 notes keep going for about 5-7 years.

TOI

RBI’s risk perceptions

This refers to the article “The RBI flashes caution” (Business Line, December 30). Even while expressing concerns, RBI has always been conservative and cautious. The present Governor, Dr Subbarao, known for his communicative skills, in his speeches and in RBI’s reports after he took over, has been following a style which is more transparent and expressive, without diluting the need for being moderate. That explains the concluding observation in the foreword to December 2011 edition of the Financial Stability Report, quoted below:

“The global financial crisis and its aftermath have demonstrated that 'risk' is all-pervasive and, often, the point of its impact difficult to gauge beforehand. In an earlier issue of the FSR, I had likened the task of central bankers to that of Sisyphus' rolling a huge boulder up a steep hill, only to watch it roll down, I fall back on Sisyphus once again - this time for his handling of his thieving neighbour, Autolycus, by marking the bottom of the hooves of his cattle, to track their passage through the muddy ground. So if the final resting place of risk is hard to observe, we should try to track its path and passage in order to be alert to the risks on the way forward.” One can only hope that stakeholders in the Indian Financial Sector including those occupying North Block in New Delhi read between the lines and act quickly to avoid a need for Dr Subbarao to come forward with more elucidation of this statement. From the same perspective, the concluding paragraphs in the article starting with “Banks resilient, but…..” are loaded with apprehensions of more severe nature than, perhaps, what the first reading may reveal. The caution that ‘when a banking system experiences a breakdown, all earlier stress tests become irrelevant and firewalls protecting the banking system melt away’ is more relevant in today’s financial market where horizontal and vertical integration of sectors has lost both geographical boundaries and private-public sector differentiation.

- M G Warrier, Thiruvananthapuram

Indian banks look at complying with Basel III guidelines

Indian banks will have to start finding ways to preserve capital and use it more efficiently, bankers and analysts said on Saturday, a day after India’s central bank issued draft guidelines on Basel III capital regulations. On Friday, the RBI said banks should have minimum tier-I capital of 7 percent, while total capital must be at least 9 percent of risk-weighted assets under the Basel III draft guidelines. Implementation of the minimum capital requirements will begin from January 2013 and should be fully implemented by March 31, 2017, it said. “We have to start working on it now so that, by the time we are there, our capital is utilised most efficiently,” N. Seshadri, executive director of state-run Bank of India said adding that “we have to do some things differently”.

IE

Growth casualty of RBI's efforts to combat inflation in 2011

The Reserve Bank of India's (RBI) unrelenting effort of controlling spiraling inflation by repeatedly hiking key interest rates despite opposition from industry and other quarters, yielded results toward the end of 2011, as food inflation slipped below 1 per cent and headline inflation showed faint signs of moderation.However,the by product was decline in growth rate

Despite all this, RBI cannot afford to relax, as inflation would continue to remain a concern in 2012 and along with the Government, it will have to deal with slowing economic and industrial growth. The RBI raised the repo rate, at which commercial banks borrow funds from the Reserve Bank, seven times during the year, by 2.25 percentage points to 8.5 per cent. However, it was a different matter that the efforts of RBI Governor D Subbarao to tame inflation did not soften inflation in the immediate run and instead pulled down the economic growth rate and industrial production. Though food inflation declined from 16-17 per cent in January to less than 1 per cent in December, headline inflation remained near the double digit mark. Moderation was, however, witnessed toward the close of 2011 and there is a good possibility of it declining further in the new year. With inflation under control, Subbarao, who got a two-year extension one month before his first term came to an end, will have to focus on arresting the fall in growth and the decline in the value of the rupee. Another issue that troubled the RBI was the declining value of the rupee against the US dollar. The Governor reiterated the stated policy of non- intervention in forex markets to correct currency imbalances and looked the other way as the rupee fell to historic lows. During the course of the year, RBI was criticised for being directionless and its failure to come out with out-of- the-box solutions. For RBI, however, there was little option but to continue the tight money policy initiated in March 2010, to contain inflation. From January through October, Subbarao raised interest rates seven times to 8.50 per cent, even at the cost of ignoring the advise of the technical advisory committee. A dovish stance, however, did manifest in December. Significantly, RBI left both the bank rate (cash reserve ratio) and statutory liquidity ratio unchanged at 6 per cent and 24 per cent, respectively. As regards inflation, it declined to 9.11 per cent in November after it had crossed 10 per cent in September. It was 9.78 per cent in October. The saving grace, however, is the food price index, which slipped to a six-year low of 0.42 per cent for the week ended December 17 from 15.48 per cent a year ago. The inflation problem was aggravated by rising crude and commodity prices on one hand and increasing government borrowings and a widening deficit on the other. The falling rupee, too, added to the worries of the Government. Growth, unfortunately, became the biggest casualty during the year. While factory output barely managed to remain in the green zone in September, it nosedived to minus 5.1 per cent in October. Last week, the Governor admitted that the GDP will not clip above 7.6 per cent this fiscal. Despite all this, 2011 was one of best years for retail banking customers as the RBI unveiled a slew of radical reforms by forcing bankers to give customers more by way of higher interest rates on savings deposits. The Reserve Bank forced the banks to reduce charges on various services like pre-payment of loans and closure of accounts. On May 3, RBI hiked interest rate on savings deposits by 0.50 percentage points to 4 per cent. The masterstroke, however, came on October 25, when the RBI freed the last bastion of the regulated interest rate regime -- savings bank interest rates. Following the announcement, several smaller banks raised savings bank interest rates. The larger ones, however, have yet to respond, but what is certain is that consumers will benefit as a result of the initiative. In another customer-friendly measure, in October, RBI asked bankers to abolish pre-payment penalties on home loans, a direction many lenders implemented. Banks charge 4-6 per cent for pre-payment of loans. The biggest casualty of 2011 was the rupee, which declined sharply, especially toward the close of the year. Although the year began with a stable rupee and a positive outlook, things took a turn for the worst after global agency Standard and Poor's downgraded US sovereign debt on August 5. The rupee started falling against the US dollar after the downgrade and the euro zone crisis only added fuel to the fire. Moreover, foreign investment inflows of $922 million in April-October were a trickle in comparison to the $27 billion achieved a year ago. In the backdrop of these developments, the rupee kept plunging to hit an all-time low of `54.30 to the dollar on December 15, though it did stabilise a bit towards the fag end of the year. 

The Pioneer 

GUNPOINT INSURANCE

.... The Reserve Bank of India (RBI) “best practice” guidelines don’t contain any mandatory directive to offer insurance with loans. In fact, banks have been advised by the regulator not to force their customers to purchase an insurance product. Even the directives are clear that the banks cannot adopt any restrictive practice of forcing its customers to go in only for a particular insurance company in respect of assets financed by the bank.................

Read............

THE REGULATOR DOESN’T PERMIT BANKS TO BUNDLE INSURANCE POLICY WITH THE LOAN. IT’S VIOLATION OF DIRECTIVES

It's time to get back on track

....Through a survey of over 80 CEOs and other top executives, we have analysed the strengths, weaknesses, opportunities and threats (SWOT) faced by Indian industry today. The results reveal a general sense of unease at the pace at which reform is happening...........

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Lock into debt while the going is good

....With the RBI already indicating that it isn't going to keep raising interest rates and may even cut them in 2012, banks may begin to trim their rates in 2012. The last time the interest rate cycle peaked out in end-2008, interest rates on bank deposit rates fell to an abyss of 7.25 per cent in fifteen months. .........

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Airport plan to take off

. “They have demanded a huge amount. With the current RBI norms, to accumulate these kind of funds is a difficult proposition,” ............

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