RBI’s Chakrabarty discusses limitations of crisis management frameworks

K.C.Chakrabarty, a Deputy Governor at the Reserve Bank of India, on January 16 said despite the overhaul of crisis management systems, central bankers and regulators must be prepared to manage the next crises. "The increasing interconnectedness of global markets, economies and institutions have only added to the potential of a crisis anywhere in the world to trigger contagion in the rest of the world," Chakrabarty told attendees of the Programme on Crisis Preparedness in Interconnected Markets in Hyderabad, India. "All this has only underscored the importance of anticipating such low-probability and high-impact events, taking pre-emptive action for preventing crises and responding effectively to such events, once they have set in – all key components of any effective framework for crisis management." Chakrabarty said recent experiences have demonstrated that resolving a financial crisis is complex and costly, regardless of what caused the crisis and the solution. He said while the best crisis management framework is one that prevents crises, no financial system can be completely immune from episodes of financial instability from time to time and there will be a need to manage crises. Chakrabarty said the best service central bankers and regulators carrying the responsibility of fostering financial stability can do is to remain prepared to manage crises. "There are important lessons to be learnt from each crisis. Yet, we can count on each crisis to be sufficiently different from every other crisis so as to make their identification a challenge," he said.

http://www.centralbanking.com/central-banking/speech/2139201/rbi-s-chakrabarty-discusses-limitations-crisis-management-frameworks

RBI outreach camp at Changki

Kohima, January 17 : The 2nd Phase of the RBI Financial Outreach Programme will conduct its next camp at Chanki village under Mokokchung district on February 8, 2012. The programme will begin at 10 a.m. where Executive Director, RBI, V.S. Das will be the Chief Guest of Honour. The main objective of the camp is to bring awareness among people in remote villages about RBI in general and banking in particular and to bring them under the fold of main-stream banking system.

The Morung Express

Banker with a Smile Needs to Move Fast

On the face of it there does not appear to be anything out of the ordinary about B Prabhakar, the new chairman and managing director (CMD) of Andhra Bank. He would, in fact, give the impression of being a docile and easy-going person. A perpetual smile on his face may have misguided many to assume that that he has little or no worries. But only a few who have worked closely with him know that he does not display emotions very easily. Also, practising yoga daily for over 25 years has helped him gain emotional stability and maintain calm. A chartered account by training and a graduate from Mysore University, Prabahakar started his career at Bank of Baroda where he worked extensively in the credit and treasury division. He was posted twice overseas — Zambia in his younger days and later on at London. Interestingly, having joined as a specialist, he was exempted from rural posting. An ardent music lover, he spent three decades with the bank where he rose to the rank of general manager way back in 2003 to become the youngest GM those days. But luck did not favour him. First, it took him five years to rise to the post of executive director. Thereafter, the appointments committee did not select him for the CMD post at PSU banks in 2009 even as most bankers felt that he was more suitable than other candidates in the list. “Fortunately, all his bosses have recognised his contribution to work which is a satisfying feeling at the end of the day,” said a colleague of Prabhakar at Bank of Baroda. He considers himself to be lucky to have worked under RBI’s Deputy Governor K.C.Chakrabarty in his former avatar as general manager—treasury. He would have learnt from him the art of putting across a point. In fact, Chakrabarty and Prabhakar joined the bank together and were in the same induction programme, with Chakrabarty one scale senior to him. While having worked under TS Narayanasami former CMD of Bank of India, Prabhakar realised the importance of taking quick decisions — something which will be very useful for him to emerge as a successful bank chief. Prabhakar was in Zambia between 1989 and 1993 at a time when the Zambian economy was opening up and making structural changes. He returned to be part of the treasury team at a time when the Indian economy too was moving from controlled environment towards liberalisation. His learning in Zambia helped him stay several steps ahead of his peers. That phase also prepared him to function in a deregulated environment and also boosted confidence level. A few years later he was given charge of the Delhi zone where he dealt with the credit portfolio. The lending business in Delhi was a unique experience as it prepared him to deal with shrewd corporates and businessmen. From Delhi, he was posted to London for three years to take over from Chakrabarty. Some of his colleagues say that as chief of the bank, Prabhakar, will have to shed his mild approach and become more tough and firm in all walks to business life. Having worked closely with different kinds of CMDs — some aggressive and some-take-it-easy types — Prabhakar is well aware of the outcome in each case. With little less than two years at Andhra Bank, he will have to move fast to get noticed.

ET

New journeys, new challenges as India's microfinance promoters sail into new lending areas

Former RBI Deputy Governor Usha Thorat says regulations will have to keep pace with the changes at the business end. "All this time, MFIs were doing many things that were not microfinance, like selling gold," she says, pointing to the practice of MFIs giving consumption loans even earlier. The RBI's December guidelines changed that by saying that at least 75% of an MFI's loans have to be income-generating ones. In this backdrop, MFIs are branching out into consumption loans. "There are new regulatory issues," says Thorat. The RBI declined to participate in this story.
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RBI extends banking facilities to remote areas of Northeast

The Reserve Bank of India, recently conducted a financial outreach camp in remote villages of Tripura. For the people of Bagmara village in Tripura's Dhalai District, banking facilities was just a dream till some years ago, but today, hundreds of them are a part of it, thanks to the financial outreach programme that has been initiated by the RBI. They villagers are happy, as more than 725 of them got their zero balance accounts and for the first time they will have a passbook. 325 soft loans were also disbursed mainly among the women self help groups of the region. Apart from Reserve Bank, State Bank, NABARD, United Bank of India and Tripura State Cooperative Bank had also set up stalls. The main aim behind organizing this camp was to aware and educate people and prevent them from putting their money in the unauthorized non banking financial companies and institutions in hope of hefty returns. "Education on financial literacy is one of the most important areas that require focus and our officials are working in collaboration with the local bodies. They are very active in educating people on various facilities available to the people from the bank," said S Karuppasamy, Executive Director, Reserve Bank of India. This was the 18th camp organized by RBI in Northeast since 2009 for enhancing banking facilities. Through these camps, the central bank has included more than 1000 villages and spread awareness on various banking facilities and security features of currency notes in northeast. Reserve Bank aims to improve the credit-deposit ratio, increase the agri credit flow and the number of branches would increase to stimulate growth of industry, trade and commerce in region. "We have received a soft loan of Rs 12,000 at very low interest rate from a bank during this camp. With the money, there will be rise in our income and it would enable us to run our families better and educate our children," said Sima Narang, member, Self Help Group. "We have received loan from the bank to cultivate mushroom. We hope to make good profits now and also expect similar co-operation from the bank in future," said Ratna, another member of Self Help Group. These facilities will not just help people keep their money safe but also pave way for the economic development of the region. Extending banking facility in the northeast is a huge challenge for the banks because of the regions difficult terrain, lower population densities, poor infrastructure and communication facilities and law and order problems.

http://aninews.in/newsdetail3/story32084/rbi-extends-banking-facilities-to-remote-areas-of-northeast.html

Shyamala Gopinath's controversial appointment

.............While the NSE is not under RBI regulation, the currency derivatives segment is under the dual regulation of SEBI and RBI. This was directly under Ms Gopinath's regulatory purview and she inaugurated all four currency bourses - that of the NSE, the Bombay Stock Exchange (BSE), MCX-SX and the United Stock Exchange. The regulator's role in this segment is nothing short of controversial with both RBI and SEBI choosing to maintain a studied silence on two major issues ...............

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Hope of rate cuts as India inflation at two-year low

….While the RBI is not seen as likely to change its stance at a meeting next week, if inflation continues on a downward trajectory - as forecast by the Government - the bank has signalled it is ready to cut…….

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Banks need to invest in digital platform: PwC

Lenders in India are not investing in digital platform for banking even as customers are ready to pay for service which they use, according to a survey by consultancy firm PricewaterhouseCoopers (PwC). "Banks have generally been slow to openly embrace the digital innovation...They [the customers] are willing to pay for these and yet the majority of banks still only provide basic mobile and Internet banking services," PwC India Associate Director for Financial Services Robin Roy said. The commercial banks tend to see digital platforms only as a way to reduce costs and it is time they start to invest in their digital offerings keeping in with the expectations of the customers, he added. PwC report 'The Digital Tipping Point' released today, said customers are willing to pay for extra services. Eighty-five per cent of those polled in India said they will pay for transaction notifications coming through social networking sites like Twitter and Facebook. Other areas where users are ready to pay include spending analysis tools, relevant third-party offers and storing documents in a virtual vault, among others. Stating that the needs of the generation Y are different and that the grouping is very diligent in choosing whom they bank with, the report says, "The quality of a bank's digital offering will become a key determinant for customer stickiness."

BS

One needs to file strong RTI application in financial sector says Krishnaraj Rao

....The session on RTI, seventh on the subject organised by the Foundation, focused on the sector of banking and finance along with regulatory bodies like the Securities and Exchange Board of India (SEBI), the Reserve Bank of India (RBI), the pension regulator, capital markets, the stock exchanges (BSE, NSE, MCX-SX and USE) and banks.......

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Assocham calls for 0.5 pc cut in repo rate, 1 pc CRR slash

…."A one percentage point reduction in CRR could release Rs 56,000 crore and help fund viable projects held up due to liquidity crunch,"….

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Reduction of bank branch audits—a right step

....A report in a leading business newspaper titled ‘CAs lobby against RBI plan to reduce audits’ mentions that the Reserve Bank of India (RBI) is likely to scrap the ‘branch audits’ for PSU banks. This is a long overdue move and should be welcomed. Branch audits have lost their relevance in the age of technology. Core banking ensures that routine checks like interest calculations, branch transfers, credits, etc, are captured at a centralised place. Credit decisions are also getting centralised. Thus, branch audits become totally redundant........

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'Online lottery' leaves man poorer by Rs 51 lakh

... Mishra received a third email, this time from a person claiming to be a Reserve Bank of India (RBI) employee. A woman also spoke to him over the phone and told him that his winnings had reached India, but as his account did not have the cash limit of Rs 5 crore, the money could not be deposited.......

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Difficult months ahead, growth could fall to below 7%: Pranab

Warning that the months ahead are difficult, finance minister Pranab Mukherjee on Tuesday said the growth rate could fall below 7% in the current financial year from 8.5% a year ago...........

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RBI remains concerned with incipient inflation: Alexander Treves

……………..While inflation is likely to ease going forward, not least due to the base effect, the RBI remains concerned by incipient inflationary pressures in the economy. Most market participants expect the RBI to cut rates during 2012; the key questions are the pace and extent of easing.

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Economic expansion at 7%: Khullar

……Analysts say the government and the RBI, unlike during the 2008-09 crisis, do not have much room to go for expansionary kind of policies. This is because the government’s fiscal deficit has widened, and there are upside risks to inflation. Food inflation which has given way to deflation in the last two weeks of December is seasonal and none is sure if would not rise again………

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Should RBI cut interest rates?

….I do rule out possibilities of a cut in the repo rate in the upcoming RBI policy next week. Start of repo rate cuts from Q2 2012 is my base case expectation. However, I acknowledge that the chances of the easing cycle starting in March have increased significantly of late…….

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Expect rates to stay steady

There is no doubt that the Reserve Bank will keep interest rates on hold this week, and no doubt that this will be the right decision. The combination of rising inflation and sluggish economic growth mitigates against a move in either direction, as does the uncertainty stemming from the sovereign debt crisis in Europe, SA’s main trading partner. There has been some recent evidence that the domestic economy is faring a little better — manufacturing output is picking up, for instance. But retail sales have slowed, while growth in investment and borrowing by the private sector is muted, showing that confidence in the economy is still weak. Overall output is expected to remain well below its potential, with many analysts now predicting tepid economic growth of less than 3% this year, slower than last year’s expected growth rate of about 3%. In fact, many believe the economy will not grow much more than 2,5% this year, a change from the previous prevailing view that growth would accelerate. This means it would be surprising if the Bank does not revise its November growth forecasts downward for this year and next, which were 3,2% and 4,2% respectively. It is clear that inflation is likely to remain outside the 3%-6% official target range in the coming months, after breaching the upper limit in November. But price increases are mainly being driven by factors beyond the control of interest rates, such as food and fuel, so a rate hike is definitely not warranted.  Keeping interest rates steady in this environment is the appropriate response. In fact, Fitch Ratings gave the Bank a big thumbs-up when it revised its outlook for SA’s credit rating from stable to negative late last week.  It said the Bank had successfully "managed inflation down" over the past decade, making its credibility an important strength for SA’s overall macroeconomic framework. Fitch indicated that higher inflation was not a problem, at least not at this point. The comments are in line with the view that few will criticise the Bank for keeping interest rates steady this year, even with inflation temporarily outside its target range.

Business Today

Limits to growth in India, China

....To the central bank, that datum will appear a fitting testimony to the success of its policy, of persistent increases in interest rates. The falling rate may tempt it to stay its hand on further increases. But for the central bank, the victory will appear to be a hollow one, if it were to cast an eye beyond its immediate mandate for price control, to the overall impact rising rates have had on growth itself...........

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Rush of FMPs before rates drop

With interest rates near peak and expectation of interest rates going south, mutual fund houses are making a beeline with new fixed maturity plans (FMPs) offerings to attract investments...........

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RBI allows commodity hedging, but not in gold, silver, platinum

……"It has now been decided to permit all AD Category-I banks to grant permission to companies to hedge the price risk in respect of any commodity (except gold, silver, platinum) in the international commodity exchanges/markets as specified under the delegated route," the Reserve Bank said in a circular……..

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Loans still for the asking

.....The educational loans outstanding at Rs 27,709 crore by end-March 2009, increased to Rs 42,808 crore as at end-March 2011, according to RBI data. This had further surged to Rs 48,965 crore by October 2011, a 17 per cent year-on-year growth in disbursals at a time when disbursals to most other priority sectors have been largely subdued......

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