Rate cut done, time for govt follow-up

At the press conference held to announce the Reserve Bank of India (RBI) decision to reduce the repo rate - the rate at which it lends money to banks - by 50 basis points, RBI Governor Duvvuri Subbarao faced a tricky question. Did he feel RBI had done its bit, and it was now up to the government to respond adequately to revive the economy? At this, the other senior RBI officials sitting alongside Subbarao burst into knowing laughter. It was apparent the answer was in the affirmative. But obviously Subbarao could not say so. The RBI Governor lost none of his cool. "A monetary easing is a necessary condition, but may not be sufficient for investment sentiments to revive," he said....................

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When death visits a bank depositor : S S Tarapore

......It would be best if, on the term deposit receipt itself, there is a stamped and signed endorsement by the bank that “in the event of death of a depositor premature termination would be permitted.” The RBI circular of June 2005 softened the blow on the family of the deceased depositor and this circular was finalised after intense scrutiny by the then Governor, Dr Reddy; the Deputy Governor, Ms K.J. Udeshi, the Executive Director, Ms Usha Thorat; and the Chief General Manager, Department of Banking Operations and Development, Mr Anand Sinha. The present top management of the RBI should review the November circular. How many families should suffer before the RBI realises that too many have suffered?

Business Line : Columns / S S Tarapore : When death visits a bank depositor

Nine in race to be Sebi board members

......Sebi traditionally appoints at least one of its members from the banking sector. Saran comes from RBI. On a few occasions, Sebi has also had two members from the banking sector. The finance ministry official said besides suitability for the job, aspects to be considered for selecting the candidates would be knowledge of work, experience and understanding of the financial system. “Market-related exposure will play the most crucial role,” the official said. This time, too, some chairmen of public sector banks are understood to have applied for the post. They include Allahabad Bank CMD J P Dua, whose term ends in August; Canara Bank CMD S Raman; Bank of India CMD Alok Kumar Misra; and RBI CGM Chandan Sinha. Sebi’s existing executive director, Usha Narayanan, and even Saran, are said to have been shortlisted for the posts.............. 

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AIBEA to go on strike against decision to close rural branches

The All India Bank Employees’ Association AIBEA has threatened to go on a strike against the government’s proposal to close down ‘non-viable and loss-making’ rural branches. The association said that closing down the rural branches meant defeating the purpose of social banking.............

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Running low on offs? Leave-pooling is here

.....Car pooling is passe. The latest on the sharing front is something called leave-pooling that one can, quite literally, bank on. An innovation by a corporate, the scheme allows employees to donate their excess leave to their colleagues who may need it in times of crisis. ..........

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Fake currency notes from ATMs: What needs to be done

..................A bank is not doing a customer a big favour by providing an ATM; it is actually doing itself a favour primarily by reducing the cost and effort of human interaction. In exchange, a customer must know what level of service to expect, and RBI needs to enforce this. Today's customer is very aware of what is going on and is willing to pay a premium for better and more reliable service. The earlier this is done, and certainly before the introduction of "white ATMs", the better.

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Public banks face cap on costly year-end deposits

.......The latest RBI data shows that scheduled commercial banks raised nearly 61,950 crore bulk deposits in the fortnight to March 9, against 38,800 crore raise in the preceding fortnight. Banks sometimes resort to this year end rush to show better performance. The banking regulator, the Reserve Bank of India, or RBI, has taken note of the wide divergence in the retail and bulk deposit rates. A senior RBI official had said late March that the practice was wrong. State run banks are not enthused by the dictate, which they say could impact their business........

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New rules make it easier for NRIs to use Right to Information Act

.............In a major victory for transparency seekers and ordinary Indians living abroad, the centre has given its in-principle nod to allow the sale of Indian Postal Orders (IPOs) through the internet to citizens living abroad. While the details are still being worked out, the decision follows the RBI giving its nod to allowing Indian citizens to purchase IPOs through the net using their credit cards. If things stay on track then soon Indians abroad would be able to log on to the department of posts website and register themselves. After doing so, they would need to upload a copy of their passports as proof of citizenship and then make the payment for the RTI online.............

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Who's spending?

Apropos the edit “They are spending” (May 3), your conclusion that consumer sentiment seems to contradict any sense that the India story is stuttering despite the gloom about macroeconomic fundamentals is inconclusive and wrong. The improved performance of the fast-moving consumer goods (FMCG) sector only indicates that the class of people who can afford to buy FMCG products has been on the rise thanks to the widening income gap and increasing purchasing power. This only proves that the demand for such goods is inelastic and that there are people who can afford these goods and much more irrespective of price rise. This does not in any way reflect the economy’s performance in terms of price rise, productivity, employment, poverty levels, infrastructural development, GDP growth, exports, imports and so on. The government’s economic policies help only the rich and the middle class and this has been validated by the better performance of FMCG products. The general theory that increase in commodity prices will reduce demand does not hold true for goods produced by FMCG companies and automobile industries in India since the demand for such goods has always been inelastic thanks to wrong taxation policies and black money.

- T V Gopalakrishnan Mumbai (BS)

How RBI intervention, strong global risk appetite can save the rupee

.....However, he explained that if the RBI and the government shows willingness to at least slow the pace of weakness in the rupee, and those measures take place at a time when global risk sentiment is a little bit stronger, then the two factors together could ultimately pull the rupee back.

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Parliamentary panel pitches for Rs 1k crore marketing fund for MSMEs

......"The Committee is of the considered opinion that the Department of Commerce takes up the matter with the Ministry of Finance/RBI to ensure that the interest subvention scheme is continued,"..........

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Banks may not hit priority sector lending target for FY12

....Priority sector includes loans to agriculture and allied activities, small-scale industries, poultry and other core economic activities in rural areas, including loans to microfinance institutions. According to RBI mandate, domestic banks have to lend at least 40 per cent of their total loans to the priority sector. For foreign banks, the target is set at 32 per cent of net bank credit..........

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Salutary show, but miles to go

......It is also sad that after the RBI raised the interest rate on dollar loan from 2 to 3.5 per cent, the banks are reluctant to provide dollar credit to exporters. RBI guidelines to banks to provide 12 per cent for export finance has not been fulfilled as banks exposure to export industry is hardly 8 to 8.2 per cent today, he justifiably cribbed...............

Read - The Hindu

Basel I, II, III…

…and, perhaps, we should be prepared for Basel IV some years down the line!

The new Basel III norms announced by the Reserve Bank of India (RBI) on Wednesday will trigger a huge chase for capital by banks. Conservative estimates place the additional capital required at about . 1.5 trillion. Fortunately, the new norms come into effect in a phased manner over January 1, 2013-March 31, 2018, so that banks have a little over five years to find the required capital. That is small consolation, especially for public sector banks (PSBs). For, while both private and public sector banks will need to tap the market to raise funds, Basle III has wider implications for the latter and, by extension, for taxpayers. The reason is the government is neither willing to relax its stranglehold on PSBs (read, reduce its stake to less than 51% by allowing them to tap the market), nor does it have the funds to infuse capital of this order. What does that mean for the hapless PSBs? It means they will not be able to keep pace with the credit demands of a growing economy if the government does not budge from its position that it wants to retain majority ownership. In the alternative, PSBs will get the money but at the expense of the hapless taxpayer. With the fiscal deficit, already at 5.9% of GDP, and inflation, as measured by the consumer price index, still hovering near 9%, that’s not a fate we would wish on the people of this country. The sensible thing for the government to do is to bring down its stake in PSBs to, say, 26% (enough to block a special resolution) while ensuring that shareholding is widely diversified and the RBI, as the banking regulator, remains the final arbiter of who is ‘fit-and-proper’ to hold bank shares in excess of 5%. The reality is that the best of prudential norms like capital adequacy are only a buffer. They cannot, and will not, eliminate crises brought on by human greed and folly. So, stringent norms must be backed by an alert regulator, strong and competent supervision and a proper incentive system to rein in the present system that allows banks to privatise profits and socialise losses. Even then, the incidence of frauds and crises can only be reduced, not eliminated in any foolproof manner. So here’s Basel III, till the next crisis and Basel IV! 

ET

Banks seen in no rush for capital despite Basel III rules

...............The Reserve Bank of India (RBI)'s guidelines on Basel-III capital regulations are unlikely to make domestic lenders scramble for funds, at least in the near term, say industry analysts and bankers.

“There is no desperation among Indian banks to raise capital,” said Rohit Bammi, partner, financial risk management at KPMG in India. “Most banks are well capitalised and do not have any immediate need for funds. Also, the banking story in India is still attractive for investors. This strengthens banks’ ability to access markets. So, even if they need to raise capital over the medium term due to growth in their businesses, there will not be any shortage of funds.”.................

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Banks need Rs 5 lakh cr capital to meet Basel norms: ICRA

......." Banks will need Rs 3.9- 5 trillion capital over the next six years, out of which common equity requirements will be Rs 1.3- 2 trillion; Rs 1.9 trillion for additional tier I; and Rs 1 trillion for tier II," an ICRA note said. This is achievable, " so long as banks can find investors for the riskier additional tier I capital," it said. The Reserve Bank on Wednesday issued final guidelines for Basel III beginning January 1, 2013 and to be implemented by March 31, 2018.........

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‘Banks have ample time to comply with Basel III requirements’

......Indian banks are within a “comfortable” range to meet Basel III requirements and will have ample time to comply with the RBI’s core capital ratio requirements, said Goldman Sachs. Goldman says private banks are already “well above” the capital requirements, while public lenders are “close to or have crossed the core 8 percent Tier 1 hurdle.”.............

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Road to Basel

RBI’s new Basel III guidelines, notified on Wednesday, pose a challenge not just in terms of how banks are going to find the R1.5-2 lakh crore of fresh capital, but also in terms of their ownership structure. Indeed, since the focus is more on Tier 1 capital which has been redefined to include mainly common equity-equity capital and reserves, this implies that banks will be further challenged going ahead. The issue of where the capital is going to come from is more pertinent for the public sector banks which have so far been dependent on the Budget for funding............

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Basel 3 norms: RBI asks banks to set aside more risk capital

........In its Basel 3 notification on Wednesday, the RBI said that Indian banks are required to set aside minimum common equity of 5.5 per cent (Tier–I) capital for its risky assets (loans). Banks also have to bring in additional equity at a minimum of 1.5 per cent of its risky assets (loans)...........

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Western Union may start domestic money transfers

......In India, local money transfers are mainly conducted through 155,000 post offices. Banks also provide remittance services with the help of business correspondents (BCs) to get rural penetration. In March, the Reserve Bank of India (RBI) allowed interoperability at retail outlets or sub-agents of BCs, which means they can cater to more than one bank at a time. The central bank had also allowed banks to appoint companies as BCs, to achieve the broader goal of financial inclusion. These measures have made the local payments space more remunerative for new players..........

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Riches-to-rags story of the gold loan industry

........The microfinance business has taken a beating. The hype created around the initial public offering, and thereafter, of SKS Microfinance, is still fresh in the minds of investors. Gold prices have touched lifetime highs in India, thanks to a depreciating rupee. However, RBI is concerned about the future of GLCs if gold prices were to soften in India. Gold prices are softer abroad by about 12 per cent.........

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Hilly districts in Uttarakhand show low CDR

Dehradun: The credit deposit ratio (CDR) which is around 51 percent in Uttarakhand has failed to show improvement, particularly in hilly districts, a big cause for worry for the state government. As per the RBI stipulation, at least 60 percent of the CDR should be achieved by the banks.......

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