Subbarao pleases all, including RBI

Reserve Bank of India governor D Subbarao (centre) along with (left to right) Deputy Governors H.R. Khan, K.C. Chakrabarty, Anand Sinha and Subir Gokarn before the announcement of the monerary policy

The higher than expected 50 basis points rate cut has pleased all concerned including the RBI. The government is happy as it believes a rate cut will help push up growth, markets are happy as the rate cut was higher than expected and the RBI is happy as it does not have to act in haste in the next few policy reviews................

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‘RBI should continue to manage public debt'

....The learning from the recent global crisis is that those systems where central bank manages government debt are more effective. When fiscal deficit is as high as it is in India, it is not only about debt management in the conventional sense. It has larger implications for liquidity management and monetary policy transmission. The balance of advantage would lie in the RBI continuing to manage public debt until fiscal deficit comes down to very comfortable levels.......

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Reserve Bank of India brokers thrive 'short-changing'

HYDERABAD: Right outside the highly secured Reserve Bank of India (RBI) office at Saifabad, an illegal business activity has been thriving involving hundreds of unemployed men and women - who have taken up the role of unofficial currency vendors. Charging anywhere between 2% and 10% to exchange higher denomination notes with lower denomination ones, these brokers have monopolized the bank role dispensing change. If there were a handful of such brokers working discreetly about five years ago, it has now become a full-fledged open trading centre with more than 200 vendors jostling for space outside the bank at any given time. Each day, this bunch of brokers exchange an estimated Rs 10 lakh and sometimes even more…………………….

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RBI bats for retail depositors, gets tough on bank NPAs

………. “The main point of the RBI was that deposit rates given to customers must be non-discriminatory, transparent and contestable. This is not micro-management; banks can calibrate deposit rates as they want, whenever they want, but all we were asking for is that they should be non-discriminatory, transparent and contestable.”…………..

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Financial inclusion must be qualitative, not quantitative

The message is loud and clear from the Reserve Bank of India (RBI). While bringing more villages within the realm of financial services remains the focus, steps must be taken to improve service quality and increase the number and value of transactions in these areas, the banking regulator said. “Going forward, the focus will be more on the number and value of transactions in no-frills accounts and credit disbursed through information and communication technology-based business correspondent outlets. For this purpose, banks have been advised that financial inclusion plans prepared by their head offices are disaggregated at respective controlling offices and further at branch levels," RBI said in its monetary policy statement for 2012-13, released here on Tuesday............... 

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Final norms on implementation of Basel III by April-end: RBI

Mumbai: The Reserve Bank on Tuesday said it will come out with the final guidelines on implementation of new global risk mechanism, Basel III capital regulations by end of the month……….

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Positive approach to NBFCs needed

....The RBI has promised draft guidelines on a new regulatory framework for non-banking finance companies (NBFCs) by end-June 2012. The NBFCs serve the demand for finance that banks shun. It is common knowledge that banks in India leave a lot on the table. India tops the charts in financial exclusion. The RBI is seen coercing the banks on financial inclusion in the same policy statement. Coercion rarely leads to sustainable development. But sustainable NBFCs can be a powerful vehicle of finance that should be supported by a positive regulatory framework.....

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RBI tightens norms for gold finance

...The Working Group, headed by K U B Rao (a senior RBI official), will conduct a detailed study of the issues connected with rising gold import and loans. The group will submit its report by July-end.
Among other things, it will examine the current practices of NBFCs involved in lending against gold and also whether it is influencing price of precious metal.......

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Gold loan curbs are because of risk concentration: RBI

……..RBI Deputy Governor Anand Sinha said the gold loan NBFCs had expanded in a very rapid manner and that led to underlying risks. “The predominant business for these companies is gold and they are relying on just one product. So there is a lot of concentration risk. What we have tried to do is to bring about some stability through our measures and also take care of customer issues. That is why the fair practice code has also been strengthend.” Sinha said there was no concern on banks’ direct lending against gold because banks were very diversified.………….

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RBI asks banks not to levy pre-payment charges on home loans

Providing relief to home loan borrowers, the Reserve Bank of India (RBI) on Tuesday asked banks not to levy any penalty on pre-payment of loans taken on floating rate. "Though many banks have, in the recent past, voluntarily abolished the pre-payment penalties on their floating rate home loans, there is a need for ensuring uniformity across the banking system in this regard," RBI said in the annual monetary policy announcement for 2012-13.....

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'Monetary policy is a sentiment booster’

The RBI’s monetary policy for 2012-13 is a sentiment booster, according to an economist. Terming it as a positive surprise, Dr Biswa Swarup Misra, Associate Professor, Xavier Institute of Management, Bhubaneswar, told Business Line that before the policy, the expectations were that it will be a 25 basis points cut or the rates will be kept unchanged. “Now, the RBI has gone for a 50 basis points repo rate cut. If not anything, it will act as a sentiment booster,” he said...........

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‘If Calculations Go Wrong, Remedies will be Different’

RBI Governor Subbarao chats up with ET on rate cut, inflation, current account deficit, customer service and more

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A risky wager

......Central bankers as a breed are not exactly known for their gambling instincts, driven as they are by cold economic numbers in their decision-making. Yet, Reserve Bank of India Governor D. Subbarao has gambled big in deciding to drop policy rates by a larger-than-expected 0.50 percentage points in his Annual Monetary Policy Statement announced Tuesday.........

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RBI's rate cut to arrest worsening asset quality of banks

.....In a bankers' meeting in Mumbai on Tuesday, the RBI Governor said the banks' asset quality continues to be under pressure and they are keeping strict vigil. In February, the two deputy governors - CK Chakrabarty and Anand Sinha - also met close to a dozen bank chairmen to assess the NPA situation. "The banks told us they are more sensitive to the need to manage NPAs than in the past," Subbarao said on Tuesday........

Read - Business Today

RBI's repo rate cut after three years is just a token

........ "The reduction in the repo rate is based on an assessment of growth having slowed below its post-crisis trend rate which, in turn, is contributing to a moderation in core inflation," RBI said in its annual monetary policy statement. "These considerations inherently limit the space for further reduction in policy rates," RBI added...........

Read - Business Today

Credit policy: Are Government, RBI on the same page?

……..However, Governor D Subbarao's policy statement reads more like a warning letter to the government than an effort to stimulate growth. He is clearly not convinced that the government would deliver on promises that it has made on fiscal consolidation or even on supply-side infrastructure that could help curb inflation……..

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Loans to get cheaper as RBI cuts repo rate ‎

The Reserve Bank of India cut repo rates by 0.50 per cent to 8.0 per cent. Repo rate is the rate at which banks borrow money from RBI. This is a reference rate used by banks to lend to their customers like companies and individuals

RBI Monetary Policy: Here is the trailer wait for the movie to hit the screens

On most of the significant policy issues—implementation of Basle III, NBFC regulation, gold loan companies, securitisation guidelines, etc, all that we have in the policy are datelines for policies to be announced by the RBI. There is more in the offing than we have in the policy, reducing the much-awaited policy to be trailer for a movie to hit the screens............

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RBI brings cheer to common man

...........At a time when personal banking has gone mostly impersonal, thanks to the invasion of technology, the RBI has asked banks to offer a “basic savings deposit account” with certain minimum common facilities. This should be done to all customers without insisting on the need for a minimum balance. The RBI has also advised banks to initiate steps to allot unique customer identification code number to all customers. These three indeed are direct-impact initiatives and go a long way in beefing up customer confidence in the banking system...........

Read - The Hindu

We are not ruling out a rate increase - D.Subbarao

.....Textbook economics says central banks take policy decisions based on inflation expectations and not the prevailing level of inflation. You seem to be very hawkish when it comes to inflation expectations and yet you have gone for a deep rate cut. Is there a disconnect?

I don’t believe so. We have looked at inflation numbers and how much they have traversed from their highs. You must remember that we had done our last rate hike in October 2011, when headline inflation was 10% and core inflation was above 8%. We have to recognize that there has been a significant drop both in headline and core inflation numbers, and we also have said that over the last one-and-a-half years, our bias has shifted from inflation towards growth.......

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‘As a central bank, we don't micro manage'

....As a central bank, we do not micro manage. We give a policy rate signal. We increase or reduce CRR and expect banks to response. We are not telling banks that they should behave one way or the other. But it is our expectation that monetary transmission has been effective and will be effective. It may take time but it will translate into lower lending rates......

Read - The Hindu

Limits to efficacy of monetary policy

...What is required is the use of supply management policies such as investments in building suitable infrastructure, focusing on new technology to improve agricultural productivity, better water management to reduce volatility of agricultural output, and, more importantly, policy coordination between the Ministry of Finance and the RBI. ....

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RBI's annual monetary policy review: Proposals & guidelines

.... RBI says the working group chaired by Usha Thorat on regulatory framework for NBFCs to release draft guidelines by end-June, 2012. The group had submitted its report in August, 2011.

RBI says the working group chaired by B Mahapatra to study guidelines on restructuring of advances by banks and financial institutions and is expected to submit report by end-July, 2012. The group, formed in January 2012, will suggest revisions taking into account the best international practices and accounting standards……

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Central bank playing with fire

....The central bank’s other goal in changing monetary policy is to make rates “consistent with the current growth moderation”. But where is the moderation? Not in RBI’s projection. It expects growth to average 7.3% in fiscal 2013. At present (the last data point we have), growth is running at 6.1%. Moving from 6.1% in the fourth quarter of 2011 to an average of 7.3% in fiscal 2013 implies a pretty strong expansion.......

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One- time wonder or more to come?

....." The RBI was clearly itchier to cut policy rates than expected, but the 50 bp cut may have been a bit too premature and aggressive, in our view. If that turns out to be the case, it could hurt RBI's credibility while doing little to raise growth on a sustained basis," .........

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Reactions to RBI policy.........

Behind the positive surprise :A.K.Bhattacharya

 ........ If the government does not reciprocate with necessary policy initiatives to fix the fisc and remove bottlenecks in fresh investments, the monetary policy is not likely to see any further easing. Finance Minister Pranab Mukherjee could not have missed that signal, even though the RBI governor may have been a little guarded about his comments on the fiscal policy authority. Who knows, Duvvuri Subbarao may have been inspired by an old Sanskrit saying that goes like this: speak what is true, speak what is pleasant, but speak not what is unpleasant even though it might be true.

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Subbu’s subtext: Don’t believe in FM or rate cut, but what to do?

......... But the makeover is unconvincing. Reading between the lines of Tuesday’s policy statement, and the previous day’s macroeconomic review by the Reserve Bank, it seems that Governor Subbarao is unconvinced about the possibility of a genuine moderation in inflation, but has instead persuaded himself to believe that his real problem is to prevent an unwholesome crash in growth......

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RBI cutting rates to boost growth: Montek Singh Ahluwalia

........I read the RBI lowering repo rate as a balanced judgement that yes inflation is matter of concern, but the time has come to change signals ... You cannot wait until it comes down to a very low level. "Policies should be adjusted as things move and that's what I think they (RBI) have done,"...............

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RBI repo rate cut surprising: Fitch

......"The governor also announced that the draft guidelines pursuant to Usha Thorat committee report on regulatory framework for NBFCs would be issued by end June 2012 while the final guidelines on securitisation would be issued by end April, 2012……………

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RBI dons activist hat for consumer cause

...... According to sources, RBI deputy governor Chakrabarty is behind the moves to get banks to be more customer friendly. Earlier in the day, a banker defended differential rates, stating that it was similar to a situation where someone who bought a television two years ago cannot complain if current rates are lower. Chakrabarty, however, refuted this argument in the press conference, stating capital costs cannot be compared with current expenditure. "If you are running a restaurant, you don't charge more for a daily customer and less for a newcomer."............

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Upside risks to inflation, downside to growth persist: RBI

RBI Deputy Governor Subir Gokarn is worried that upside risks to inflation and downside risks to growth persist. The RBI will act proactively on the tricky issue, he said in an interview to CNBC-TV18................

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Growth moderation behind cut

.............The other instruments also have to be flexible. We cannot have a financial system where part of the system responds to RBI’s policy rates and the other is rigid. I don’t know if interest rates will come down on all these products, but I think they should come down. In fact that is one of the recommendations of the Shyamala Gopinath committee on small savings that the interest rates must be calibrated to the 10-year government security.

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Sebi in talks with RBI, Irda for common KYC norms

Aiming to ease procedural hurdles that investors face, market regulator the Securities and Exchange Board of India (Sebi) today said it was in talks with other regulators, including RBI and Irda, for common know-your-customer norms for the financial sector……

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