RBI among world’s best central banks,says The Economist

Mumbai: India's central bank,which was under pressure for failure to control inflation,has been the recipient of effusive praise from UK-based weekly publication,The Economist. The article also indirectly vindicates RBIs decision to go against the tide and chase multiple objectives rather than merely rein in inflation. The 169-year-old magazine (which calls itself as a newspaper) has described Reserve Bank of India (RBI) as one of the world’s best central banks and one of Indias best institutions.Relative to most Indian state bodies,the RBI has more brains,muscle and integrity.It is about the only institution in the country you never hear accused of graft. Thats a big turnaround for a body that became a politicians plaything after India nationalized its banks in 1969, the report said. The endorsement for the central bank comes at a time when it has been resisting pressure from the finance ministry to open up banking sector and grant more bank licences.The government had also not taken too kindly to RBIs 13 rate hikes,which it felt was hurting growth.RBI has also been steadfast in its stance that,in India,the central bank needs to have multiple objectives and not restrict itself to inflation targeting.Since 1995,wholesale prices have risen by an average of 6% a year,not too far from the RBIs comfort zone of about 5%.Growth has averaged 7% a year.The RBI is also in charge of the safety of the financial system,to which end it yanks more levers than Willy Wonka in a chocolate factory, the article said. 

TOI

RBI asks bankers to "stir up passion" for financial inclusion

Chandigarh, Feb 15 (PTI) The Reserve Bank of India (RBI) today asked bankers here to "stir up passion" for providing banking facilities to unbanked villages in Punjab and Haryana within stipulated time frame of March 2012. The apex bank made this observation while reviewing the FIP's during the State Level Bankers’ Committee (SLBC) meeting for Punjab and Haryana held here. Over 450 villages in both states are yet to be covered under Centre's most ambitious Financial Inclusion Plan (FIP). "Passion and zeal is missing among bank officials... There has to be passion... Let us change our attitude... We are not officers... We have to work as public servants," Jasbir Singh, RBI Regional Director, said while discussing the review of financial inclusion programme. RBI says merely opening accounts of villagers in unbanked areas under FIP will not serve any purpose where transactions in holders' accounts is minimal. "Mere opening of accounts will not serve purpose... transactions should also take place in the accounts," said Singh, acknowledging that number of transactions in accounts were not encouraging at several places. He added that bank officials need to go to the masses in villages and try to bring them in the banking fold. RBI in its field visits conducted at some places in Punjab and Haryana found that bankers were enrolling the beneficiaries while showing them as covered under FIP, though smart cards were not issued to account holders, he said. In some cases where the smart cards are issued, it remained non-operational, he added. According to RBI, the FIP is treated as complete with the whole operations of identification, enrolment, issuance of smart cards, and its operations by the account holders to be ensured by Business Correspondents. Banks have been given the target of covering 1,576 unbanked villages in Punjab and 1,838 villages in Haryana, with a population of 2,000 and above, by March 2012. Out of these, 1,260 and 1,670 villages have been covered in Punjab and Haryana by December 2011, respectively, SLBC report said. Singh also stressed on creating awareness among villagers about the benefits of banking services so they could start using banking services at large scale. Coverage of unbanked villages under FIP assumes significance as the Centre intends to extend benefits of banking to each citizen of India for speeding up economic development. 

http://ibnlive.in.com/generalnewsfeed/news/rbi-asks-bankers-to-stir-up-passion-for-financial-inclusion/963955.html 

Mint Road rules

You could call it Reserve Bank of India Governor Duvvuri Subbarao’s “revenge” on Chief Economic Advisor Kaushik Basu. The forthcoming monetary policy review by the central bank is slated for Thursday March 15, which also happens to be the day the government is to table the pre-Budget Economic Survey for 2011-12 in the Lok Sabha. For Basu, this will be his third and last Economic Survey, a document he holds dear. If Subbarao comes out with the monetary policy review the same day, the Survey will likely be overshadowed by what the central bank does or does not do. Many will also see that as Mint Road’s triumph over North Block!

BS

What's on RBI's mind

Long before behavioural finance became a popular theme, central bankers took psychology into account. Monetary policy aims at modifying crowd behaviour. By tightening or loosening money supply and tinkering with interest rates, central banks try to nudge economies in the right direction. One primary axiom for a central bank is to keep everyone guessing. If other actors figure out the bank wants a certain exchange rate, or it is targeting a specific inflation rate, they may react in ways that are sub-optimal. Central banks also realised behaviour is linked more to future inflation expectations than to current inflation levels. In the 1980s, the US Federal Reserve developed a very harsh inflation doctrine, consisting of raising rates till all inflation expectations had been squeezed out. In the late 1990s and early 2000s, Fed policy swung in the opposite direction. At the slightest signs of trouble anywhere, it would loosen money supply. The excess liquidity, eventually, caused a massive bubble with all asset valuations rising. Since the dollar is, for better or worse, the global default currency, that bubble affected the global economy. For the past four years, the world has been struggling to deflate that bubble without any catastrophic ramifications. India was a beneficiary of the boom. It attracted large inflows. Now, it is walking a tightrope to ride out the bust. Since the government is paralysed, the only policy option is via the Reserve Bank of India (RBI). What are RBI’s targets and what is its inflation doctrine? Inflation versus growth is the balancing act. Growth or the lack of it, is somewhat sensitive, while inflation is a very politically sensitive subject in India. The central bank doctrine is generally inclined to be on the harsh side. Many states are going to the polls this year. This could keep the RBI from loosening. But the case for rate cuts is becoming stronger with every new data point. The index of industrial production has shown consistent weakness in the three latest months. The wholesale price index has fallen to a 26-month low. Growth has shown weakness in the last two quarters. Corporate results have been anaemic. The gross domestic product estimates have been scaled down. If these aren’t enough to induce cuts, one will have to assume RBI has very specific targets for inflation and perhaps a fear of major currency fluctuations. The market is now factoring a big rate cut in April into valuations. It is also assuming that will be the start of a trend of a falling rate cycle. If those expectations are belied, the results will not be happy for bulls. Are these the expectations RBI wants?

- Devangshu Datta, (technical and equity analyst) BS

Subarao meets Naveen; to attend RBI's BoDs meet tomorrow

Bhubaneswar, Feb 15 (PTI) Reserve Bank of India (RBI) Governor D Subbarao today met Chief Minister Naveen Patnaik and attended the golden jubilee function of the Bank's regional office here. The meeting between the Chief Minister and the RBI governor lasted for about 40 minutes. Subbarao refused to share any information with the media about the meeting. "I will not speak anything in view of the model code of conduct for elections," he said. Patnaik, on his part, described the meeting as a courtesy call. After his arrival here in the afternoon, Subbarao attended the meeting of a special State Level Bankers Committee (SLBC) here. He is scheduled to attend RBI's Central Board of Directors meeting here tomorrow. Besides Subbarao, RBI's Deputy Governors K C Chakrabarty, Subir Gokarn, Anand Sinha and H R Khan and other top level officials would participate in the Board of Directors' meeting. 

IBN Live

Naveen urges RBI to help poor and destitute

Odisha Chief Minister Naveen Patnaik today asked the Reserve Bank of India (RBI) to take more vigorous and proactive intervention in financial literacy and credit counselling to help the poor and destitute at their hard times. Addressing a meeting organised here to celebrate the 50 years of RBI in Bhubaneswar, the chief minister said the poor were exposed and often attracted to a lot of risky choices when they acquire some surplus out of their meagre incomes. They should be aware where to deposit their savings for what period and at what interest rate so that they do not lose their hard earned money by fake promises and false propaganda by the fly-by night operators and greedy financial vultures. Mr Patnaik said, similarly, the credit needs of the poor are qualitatively different from their wealthy counterparts. The poor need in small doses but more frequently. They had hardly any assets to offer as collateral. Empowerment of the poor would happen only when they acquire the capacity and confidence to shape their destiny, he said. Among others RBI Governor D Subbarao also spoke on the occasion. Earlier, the RBI governor also called on the chief minister at his office and discussed some important issues. He however, refused to divulge any thing to the press in view of the code of conduct in force in the state for the ongoing Panchayat elections.

http://news.webindia123.com/news/Articles/India/20120215/1928485.html

Inflation trending down, rate cycle at its peak: Gokarn

............ Gokarn, who is in-charge of monetary policy, added that in RBI’s view inflation is “trending down from the highs of nine percent plus to something closer to seven per cent”.The non-food manufacturing inflation, which stood at 6.49 percent year-on-year, is also broadly in line with RBI projection, Gokarn said......................

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RBI may not cut rates in March 15 policy meet: ICICIdirect

.......We therefore hold our view that RBI may not cut rates in March 15 policy meet and first repo rate cut seems to be coming in annual monetary policy during April 2012,`` .......

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BIFR is being ‘manipulated': Y. V. Reddy

..........The Reserve Bank of India had adopted strategic innovation while dealing with foreign exchange rate issues during the period of the Asian crisis more than a decade ago..............

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Global stage for growth

....A special plenary session would be held on the inaugural day on “Strategies for mainstreaming less-developed regions in the inclusive growth process” with a special reference to Bihar. London School of Economics professor Nicholas Stern would be its moderator. RBI governor D. Subba Rao and Planning Commission deputy chairperson Montek Singh Ahluwalia would be among the key speakers.....

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Some relief

.......... However the ground may have been prepared for the RBI to ease its hard line monetary stance and to cut interest rates. The apex bank has been rightly reluctant to do so because it wanted a convincingly steady fall in inflation over a period before acting. It may still wait for a few weeks. But it may have to act sooner rather than later because the tight monetary policy has choked investment and growth, as seen in the falling GDP figures. A reduction in interest rates by the RBI, effective fiscal measures on the part of the government and a growth-oriented budget can help to strengthen the hopes created by falling inflation.

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A right move

Regarding “RBI hikes bank rate to 9.5%” (Business Line, February 14), the Marginal Standing Facility was recently introduced by the RBI for commercial banks to survive liquidity conditions. It is good on the part of the RBI to have realigned the bank rate to the Marginal Standing Facility rate at 9.5 per cent, in a one-time technical adjustment. Instead of having to change several rates, it is good to follow a base/policy rate, so that when this rate undergoes a change to realign with the prevailing market forces, the remaining key rates would move in a similar direction.

-  Srinivasan Umashankar, Nagpur (HBL)

‘RBI approach timid, should let rupee appreciate’

... I think an obvious thing to do is to let the currency appreciate. I don’t believe the RBI needs the reserves that they have. They are excessively large, but we will have to see how that works out,”......

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Watch those NPAs

RBI Deputy Governor Anand Sinha’s assessment of the NPAs of banks should be heeded. Sinha said that “the situation is under control but there is an underlying reality that is not very comfortable”. He pointed out that gross NPAs are rising, clearly the result of some reckless lending before the slowdown hit the economy. With economic growth looking up only slightly, smaller corporates are understandably unable to service their loans as reflected in the ratio of recoveries to NPAs, which has dropped to less than 29% in 2010 from around 41% in 2008.............

FE Editorial : Watch those NPAs

Fake currency racket busted in Kurnool

...Meanwhile, the Reserve Bank of India directed banks not to return the fake currency to public or destroy them.....

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Draft norms for ATMs from non-banking firms

..............The guidelines on five transactions per month for using other bank ATMs would not be applicable on WLAs. In such cases, the operator can charge the interchange fee to the issuer bank. “The charges for the transactions should be displayed on the screen before the customer initiates the transaction,” said RBI..............

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More counters for tax payers

KANPUR: At times, it has been observed that there is increase in the number of persons depositing income tax dues in the last days of March at Reserve Bank of India counters. Keeping this in view, additional counters are opened in the bank. Deputy General Manager (Banking) Rajeev Dwivedi said that facility for depositing income tax by cash or cheque is also available at 145 branches of public sector banks, including State Bank of India and at three branches of private banks. The list of such branches has been displayed outside the premises of RBI and also at branches of other commercial banks.

TOI

RBI shocked as fake note passes ultra-violet test

..........The police said the fake notes they seized from the arrested duo on Monday are made such that they can pass even ultra-violet test. A police officer said even the officials of the Reserve Bank of India are shocked as to how it can happen. The fake notes have copied about 35 of the 50 unique features of original notes.............

DNA - Read more...................

RBI moves against fake currency deposit

Lucknow, Feb 15 (IANS) The Reserve Bank of India (RBI) Wednesday filed an FIR against nine banks in Lucknow on charges of depositing counterfeit currency to its vault here. Shalini Sachan, the assistant general manager of the RBI, lodged the first information report (FIR) at the Gomtinagar police station. The banks against whom the RBI moved include select branches of State Bank of India, ICICI Bank, Oriental Bank of Commerce, Indian Overseas Bank, Vijaya Bank, Bank of India, Syndicate Bank and Allahabad Bank.RBI officials said fake notes totalling Rs.39,030 were deposited by these banks. The notes were in Rs.10, Rs.50, Rs.100, Rs.500 and Rs.1,000 denomination.

http://news.in.msn.com/business/article.aspx?cp-documentid=5849195

Rise in NPAs, loan recast spoils banks' show

..... "The situation is under control, but there is an underlying reality that it is not very comfortable," RBI Deputy Governor Anand Sinha was quoted as saying. "From 15% in 1995, NPAs came down till 2008, but they have risen sharply by 91%in 2006- 2011."………..

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Madras HC rejects petition to curb micro-lending in state

The Madras high court has not granted relief to a petitioner seeking the introduction of legislation in Tamil Nadu to curb microfinance activities by private players in the state. A similar law passed by the Andhra Pradesh government in October, 2010, which banned weekly collection of dues, severely affected microlenders, eroding their profitability and threatening their existence. The high court, however, said the state government should step in to protect the interest of self-help groups if it found microfinance institutions (MFIs) were resorting to “unfair and unhealthy” practices. It added there was a need to empower self-help groups. “We also hope steps taken by the Reserve Bank of India (RBI) in introducing the Micro Financial Institutions Bill becomes an Act to provide the necessary safeguard to affected parties and provide a successful check on the unhealthy practices of MFIs,” judge Chitra Venkataraman stated in the order, a copy of which is with Business Standard. MFIs said the judgment was positive for the sector, as curbing microfinance activities by private firms would not only hurt the recovery of the sector, but also impact the rural poor who do not have access to formal banking channels.

BS

An Overview into FRSGlobal’s Solution to RBI’s Automated Data Flow (ADF) Implementation

Date :	Thursday, 23rd February 2012
Time :	10:30 am - 11:30 am IST (GMT + 5:30)
Venue :	Online - Webex

Wolters Kluwer Financial Services’ FRSGlobal is pleased to announce that they will be conducting a webinar about its Solution to RBI’s Automated Data Flow (ADF) Implementation on 23rd February 2012.

The webinar will be about Automated Data Flow (ADF) and what it means for banks in India. Find out how Wolters Kluwer Financial Services’ FRSGlobal’s regulatory reporting solution is exactly aligned with Reserve Bank of India requirements.

You will have a chance to see our content rich solution, visualized by industry domain experts, which will ensure compliance to all the regulatory reports required by the RBI.

You will also learn about the intricacies and complexities of regulatory reporting for banks in India with a live demo of the functional and technical features of our solution. Participants can also put forth questions to our subject matter experts, during the webinar or on a follow-up conversation.

Places for this event are limited; please register your interest for this event by completing the form below.

http://www.frsglobal.com/news_and_events/solution-to-rbis-automated-data-flow.html

NDMA mulls Rs 923 cr for fail-safe communication network

.......... NDMA is also preparing guidelines for Reserve Bank of India (RBI) for bank financing in infrastructure sector which would also include the communication sector. "This will ensure disaster resistant design criteria in all the infrastructure projects and will go long way in maintaining better communication connectivity,"………….

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SC restrains Kerala court from passing orders on temple assets

.............The petition filed by Jacob J Mappilacherry, through advocate Nishe Rajen Shonker, arrays the Union of India and the RBI as parties and highlighted the “importance of treasures like the Travancore temple treasure to the national economy”.

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After Pai’s exit, Sebi board has no industry member

...The current Sebi board composition include representation from Finance Ministry (Thomas Mathew, joint secretary, capital markets, department of economic affairs), ministry of corporate Affairs (Naved Masood, secretary, ministry of corporate affairs), RBI (Anand Sinha, deputy governor, RBI) and a former civil servant VK Jairath, in addition to three Sebi top officials comprising chairman UK Sinha, whole-time members Prashant Saran and Rajeev Kumar Agarwal.........

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Microfinance industry confident for recovery

After more than fifteen months of battling the microfinance crisis, industry players now appear to be optimistic for a revival in 2012. With positive developments like the creation of a new category of NBFC-MFIs by the Reserve Bank of India, easing of liquidity crunch and a Microfinance Bill in the offing, the sector is expecting to get back on the growth track once again.........

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