We don't want flip-flop on policy till inflation subsides: Subir Gokarn, Deputy Governor, RBI

......... Basically, our objective was to address the liquidity constraints in the system. We have been doing OMOs for about seven weeks now and the liquidity pressures still persist. The CRR is essentially a liquidity tool, but it has strong monetary signalling in it. When we looked at the liquidity situation, we realised that a CRR cut would address it without compromising , or conflicting with, our monetary stance. We addressed the liquidity problem with an instrument that has monetary implication but does not compromise our monetary stance............

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Subbarao sets homework

At the end of the post-policy conference call between the Reserve Bank of India (RBI) and researchers and analysts, most participants found themselves left with a lot of homework — given by the Governor himself. During the call, participants made suggestions to RBI to improve the quality and speed of data analysis and dissemination. D Subbarao’s reply was to ask them to undertake research on how to achieve this and send in a copy of their findings to the central bank!

BS

Five principles of financial regulation for stability in 2012

..... The focus of his presentation the creation of a stable financial market in 2012 got me thinking about the kind of regulation that will be required to achieve that objective.  It also reminded me of insights I recently came across from one Usha Thorat, director of the Centre for Advanced Financial Research and Learning in Mumbai and a former Deputy Governor of the Reserve Bank of India.....

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Govt may introduce Micro-finance Bill in Budget Session

The government is likely to introduce a Bill that seeks to make it mandatory for all micro-finance institutions to be registered with the Reserve Bank of India in the Budget Session of Parliament. The Finance Ministry has sent the draft Bill to the Law Ministry for approval and will subsequently seek Cabinet's nod, official sources said............

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RBI seeks power to regulate all subsidiaries of banks

.... "Banks have forayed into insurance, broking, mutual funds, private equity, and have become complex and large financial conglomerates. If the subsidiary fails, it can dent banks' profitability and erode capital. To avoid such a situation, RBI wants to have supervisory powers,".....

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India can leapfrog cheques to move straight into electronic banking

..... Electronic payments would spell major gains. For banks trying to lower branch-banking costs, by encouraging customers to avail of internet banking; for trade and commerce, for whom instantaneous funds transfer means a huge saving in costs; for tax authorities, who will get a handle on transactions that otherwise are off their radar, and for ordinary citizens who will get speedier service. Replacing cheques with electronic payments will also be environmentally friendly. All the more reason for the RBI and government to join together and publicise the advantages !

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Public sector banks set to 'swipe' in new sale order

...........The government has decided to form a company in which top state-run banks, including State Bank of India, Punjab National Bank, Bank of Baroda, Bank of India, Canara Bank and Union Bank of India, along with National Payments Corporation of India (NPCI), would be stakeholders. This company would buy PoS terminals and deploy these on behalf of the lenders across merchant outlets in the country.................

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Electronic payments

Electronic transactions are making rapid strides as reported in “Bye-bye cheques, hello electronic payments” (Business Line, January 23), thanks to the efforts of our banks and the RBI, who are encouraging Internet transactions and introducing technology to do banking transactions from home.  Internet banking is very popular among retail customers, but unfortunately, the RBI and banks aren't able to persuade most firms and the corporate sector to take up regular transactions online. Banks are equipped with technology, safety mechanisms and security to safeguard transactions and facilitate easy recognition. The only way to move towards paperless transaction is to encourage online transactions by providing incentives and discouraging branch-level transactions. 

- Srinivasa Sarma, Hyderabad (HBL)

Bankers to discuss cyber security

The seminar 'Banking on e-Security - RBI's Gopalakrishna Working Group' is being organised jointly by city-based Cyber Society of India and Indian Overseas Bank (IOB).

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Banking on derivatives

....If hedging price risks expands their scope for financing of agriculture, it is definitely worth relaxing the existing restrictions, subject to the overall capital market exposure limits permitted by the Reserve Bank of India........

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Inflation? Don’t tell us. Govt to stop publishing weekly data

Call it coincidence. But a day after the Reserve Bank of India (RBI) mentioned the ‘i’ word 79 times in its third quarter monetary policy review, the UPA government has decided that it is hearing the word “inflation” a bit too often. Among other things, the Reserve Bank Governor said that the current fall in food inflation is seasonal, and things could worsen later this year. The ‘i’ word was packaged with dollops of advice on reining in subsidies and improving supply to deal with inflation on a long-term basis............

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Has Subbarao put out the welcome mat to inflation?

...... The RBI’s agument that CRR will merely replace the liquidity now being created by lending through repo auctions doesn’t quite hold, since CRR multiplies money exponentially compared to repos auctioned through the liquidity adjustment facility.......

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RBI deploys the wrong instrument : S S Tarapore

One wonders why the RBI decided to relax the cash reserve ratio. Given that the central bank's stance is to increase liquidity, forex purchases would have been the ideal instrument to use...................

As the saying goes, the heart has its reasons. One only fervently hopes that the RBI does not have to rue its decision.

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In defence of the Reserve Bank of India - Mythili Bhusnurmath

..... Today if the RBI has lobbed the ball into the government’s court it is because monetary policy has reached its limits. It is now for the government to do its bit. Going by the number of fiscally irresponsible actions, there is little sign as yet that it has realised the gravity of the situation. It is only appropriate therefore that the RBI has finally stopped mincing words and done some plain speaking, even if it is accused in the process of shirking responsibility and ‘lobbing’ the ball back into the government’s court.

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Has RBI taken the wrong path by letting short-term volatile debt rescue rupee?

.... "RBI is basically signalling Indian banks to learn to manage their profitability by setting their rates on commercial considerations," ......

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TEA not happy with RBI decision

The Tirupur Exporters Association (TEA) has expressed disappointment over the Reserve Bank of India's third quarter review of Monetary Policy, released on Tuesday, which retained the short-term bank rates (repo and reverse repo) at 8.5 per cent and 7.5 per cent, respectively. “With repo and reverse repo maintained at the same level, the interest rates levied by banks on loans are not going to come down. Moreover, the policy did not have any announcement for export sector,” TEA president A. Sakthivel has said. Technocrats like S. Dhananjayan, a senior member of Institute of Chartered Accountants of India, feel that the RBI's decision to reduce the CRR from 6 per cent to 5.5 without bringing down the Repo and Reverse Repo rates would only ease the liquidity problems but not likely to scale down the interest rates. The apex bank's contention was that cut in the CRR, the amount of deposits the banks were required to keep with RBI in cash, could possibly prompt the banks to reduce the interest rate to attract borrowers. Mr. Sakthivel said the expectations of exporters for extension of the 2 per cent interest subvention to knitwear and garment sectors across the board too were not addressed by the RBI.
HBL

RBI empowers banks on end-use of ECB funds

Banks say move streamlines foreign fund-raising, removes administrative flaws

.... “The step shows RBI is now more comfortable in delegating powers to the authorised dealers (banks). The action by the regulator will help in fine-tuning the operational procedure for ECBs,".....

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