State-run banking giant SBI has said it temporarily exceeded RBI-prescribed credit exposure limit for the fourth year in a row in 2011-12 with regard to loans given to Mukesh Ambani-led Reliance Industries..........
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Monday, June 11, 2012
Cutting the Gordian knot
Contradictory statements from RBI officials hurt market sentiments
........... Early last week, RBI deputy governor Subir Gokarn rekindled the hope when he said that the central bank has some elbow room to reduce policy rates following a moderation in core inflation and drop in global oil prices. Liquidity in the banking system is in “comfort zone” as of now, said Gokarn, citing a recent drop in banks’ daily borrowings from RBI and steady, overnight cash rate. According to Gokarn, lower-than-expected economic growth will have some bearing on the central bank’s projection of GDP growth for 2012-13. The stock markets moved up, factoring in a 25-basis points rate cut. By the end of last week, things again turned upside down. KC Chakrabarty, RBI deputy governor, on Friday said inflation was the first priority for the central bank and that policy rates were not that high to restrict growth significantly, watering down the case for an interest rate cut. The stock markets witnessed some quick profit booking as confusion lingered in the market. Chakrabarty doesn’t believe that a drop in policy rates, even if it were as high as 200 basis points, would significantly help India Inc in reducing lending rates. He argued that adequate capacity is available right now to ramp up India’s manufacturing growth back to 8-9 per cent, from the present 2-3 per cent levels, before one could expect any massive investment in new capacities. Policymakers should refrain from sending out confusing signals........................
Avoiding the quicksand
.......................The deepening global crisis has even forced Beijing to act with alacrity. The Chinese Central Bank surprised the world with a 25 basis point cut in interest rate. This is the first time since the global financial crisis in 2008 that China has cut the interest rate. The China move has led Federal Reserve Chairman Ben Bernanke to declare that it would do whatever to protect the U.S. financial system and the economy. It is against this backdrop that the ensuing policy review of Reserve Bank of India on June 18 has raised a huge expectation. It's time the monetary and fiscal authorities spoke a common language and get the country to stay away from the the quicksand.
Let the regulators decide, please
Chief of the Securities and Exchange Board of India UK Sinha rarely speaks out of turn. Irrepressible KC Chakrabarty, deputy governor of the Reserve Bank of India, almost never gives up an opportunity to do so. On Friday, both landed up on the front pages of newspapers for very similar reasons, however. They had both rapped the governments’ handling of the economy. Both criticised the finance ministry for its take on the economy. The criticisms come at a time when the finance minister is just a nod (pun intended) away from moving over to the Rashtrapati Bhavan. Both Sinha and Chakrabarty have sort of made it clear then that there is no one who is now steering the economy from Raisina Hill. So, on June 18, to ask the RBI Governor to nod to a vacant seat and take a call on the rates in what will essentially be a political decision is unfair (Chakrabarty). Later, to expect a new finance minister to cobble up support with the allies and the BJP to pass all those economic bills the government has promised to pass through Parliament (Sinha) also looks very tough.....................
My View on "RBI's KC Chakrabarty counters Gokarn on possibility of rate cut"
The game those who are responsible for policy formulation are playing takes one back to the age-old transactional analysis, with PAC. Kaushik Basu and team can take the 'Parent' position, RBI the 'Adult' slot and Aam Admi the 'Child' position. Between the 'critical parent' and 'the crying child' RBI Governor gets jammed.To add to his embarrassment, his own team members come to open and share their wisdom(Gokarn) and ignorance with public.Top people within the organisation should better use internal forums to share their views and avoid airing divergent views in public on the eve of Governor's deliberations preceding policy announcements.
M G Warrier
Of heads, elbows and rooms
...........The day after the Union finance minister categorically, and quite correctly, ruled out any scope for fiscal stimulus, the Reserve Bank of India (RBI) suddenly discovered elbow room for cutting interest rates to push growth. This is the new anatomy of the Indian economy: since there is no headroom for fiscal stimulus, there has to be elbow room for monetary policy action. The compulsions are clear. Both these policy “guidance”—one negative and one affirmative—came as soon as the data showed that growth had slumped to its lowest level in nine years’ threatening to pull the gross domestic product (GDP) growth to below the comforting number of 6%..........
Central banks, govts have no choice but to act
.....I think we are at a stage where central banks, governments, including India by the way, have absolutely no choice but to act. Actually, to be honest I called 5.5% last week, which people at that time thought that maybe this guy has sort of lost it a little bit... What that actually means is that RBI, which is caught between a rock and a hard place, will act and it will sort of err on the side of ensuring that growth doesn’t completely go off the cliff, and in a sense it will be a mini crisis for India where Delhi will have to act as well........
Some unpleasant forex arithmetic
.....The Reserve Bank of India’s (RBI’s) market intervention strategy and the efficacy of its administrative measures to support the rupee have to be seen from this perspective. In a period when portfolio flows are weak, RBI has to fill this gap by offering dollars from its stock of reserves. The success of “intervention”, thus, depends on what percentage of this $2.5 billion deficit RBI absorbs by supplying dollars. There are again a couple of things about RBI’s intervention strategy that are becoming clearer as the rupee comes under successive rounds of depreciation pressure. First, RBI is unwilling to do much when there is risk aversion all around. This was quite apparent ........
‘Banks not proactive in tracing customers of unclaimed accounts’
In a scathing criticism to the banks, the Reserve Bank of India has said that despite its instructions, banks have not been pro-active in tracing customers linked with unclaimed deposits/inoperative accounts. The central bank said the need to identify the owners of these unclaimed deposits/inoperative accounts is closely linked to KYC due diligence.............
e-fraudsters may use fake RBI letters to dupe you
......The con letter appears to be coming from the Foreign Exchange Transfer Department of RBI where it informs the recipient that he or she has been 'compensated with a sum of £500,000'. The letter is signed by chief general manager-in-charge Salim Gangadharan. It goes a step further and claims that the £500,000 is a legal fund from the UK to the less privileged in India - pensioners, scam victims, orphans, the sick, needy and the poor - and that the application has been pending since 2007.................
Scammers take clue from RBI directive
Scammers seem to be adapting to changes fast, as a spam e-mail offering unclaimed funds in Indian banks has been landing in the in-boxes of scores of email users these days. The RBI recently directed the banks to take steps to disburse the about Rs 1,700 crore that were remaining unclaimed in various bank accounts in the country. Taking the cue, an e-mail with the sender mentioned as Funds Remittance Department of RBI, New Delhi, “informs” that the recipient was entitled to unclaimed fund of $500,000.............
MUCBF appeals CKP coop Bank depositors not to withdraw funds to avoid RBI action
............However, if the depositors continue to withdraw, the bank may face liquidity crunch and in that case, the RBI could impose moratorium and put a cap on further withdrawals. He also said that the Federation had never taken up the case of any co-op bank against which the RBI had taken action but in case of CKP Bank the issue was different and hence the Federation was supporting it, he said. The bank itself had also come up with an advertisement recently saying that its position was sound and the depositors' money was secured........................
42 cooperative banks under RBI scrutiny for rule violation
The Reserve Bank of India has put 42 cooperative banks under a revival programme that involves a thorough scrutiny after the lenders failed to meet critical parameters on minimum capital and net worth.
RBI has barred the lenders from accepting fresh deposits from the public after they missed the 31 March deadline to satisfy the norms. The programme, known as the monitorable action plan (MAP), is a last-ditch effort by the central bank to revive the businesses of distressed banks. The banks have till 30 September to revive their businesses and improve capital adequacy............
Banks push FD schemes ahead of possible interest rate cut by RBI
With expectations of an interest rate cut gaining momentum ahead of the Reserve Bank of India’s (RBI) mid-quarter monetary policy review scheduled for June 18, banks are going all out to promote their deposit schemes and dangling the carrot of higher rates before a possibility of interest rates falling.........
All eyes and hopes rest on RBI
.......However, RBI faces a difficult choice. Which macroeconomic variable does it look at? Double-digit inflation or rapidly decelerating growth—which has already begun to derail the unprecedented momentum that the economy had acquired in the last decade? Undoubtedly, a disciplined Union government could have made all the difference if it had done more than being a mere paper tiger when it came to tackling the fiscal deficit—or gross borrowings of the government. Regardless of which way RBI calls, there are serious consequences for the economy. In more ways than one, it will be the toughest choice faced by RBI governor D. Subbarao; this says something for a man who took charge in the midst of the Lehman crisis that triggered the 2008 global economic crisis. All eyes on RBI then..................
Competition watchdog may look at all sectors
........The DFS and the DoT had sought exemption, saying the sector regulators (the Reserve Bank of India and the Telecom Regulatory Authority of India) had sufficient expertise to deal with cartelisation, monopolistic behaviour or unfair competition. The DFS had argued under the Banking Laws (Amendment) Bill, 2011, Parliament’s standing committee on finance had approved the exemption of bank mergers from the purview of the Competition Act..................
No significant improvement in FY13
.The build-up in the banking sector was attributed to assumptions on the Street the Reserve Bank of India (RBI) will cut repo rates by 50 basis points and the cash reserve ratio by 50 basis points on June 18........
No-frills accounts rise over two-fold in last 2 years
............The Reserve Bank (RBI) has launched the financial inclusion programme to provide financial services to people in unbanked areas. RBI's approach to financial inclusion is aimed at connecting people with the mainstream financial institutions like banks, the apex bank said. "Goal of financial inclusion is better served through mainstream banking institutions as only they have the ability to offer the suite of products required to bring in effective or meaningful financial inclusion," RBI said. The number of business correspondents (BCs), who carry out banking operations on behalf of banks, increased to 96,828 from 33,042, it said..........
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NHB not to up capital requirement for HFCs
.........A committee chaired by former Reserve Bank Deputy Governor Usha Thorat had recently recommended for increasing the minimum capital requirements to 15 percent from the present 12 per cent for non-banking finance companies (NBFCs). In defence of the move not to increase the capital requirements, Verma said HFCs, which include players like HDFC, LIC Housing Finance, Dewan Housing, have a clearly defined business model which has low risks, as compared to NBFCs. "In NBFCs, the portfolios can be widely varying and there can be very quick changes or dynamics in their balance sheets. That is not something which can happen to HFCs,".......................
Repco Bank looks at RBI policy to operate as commercial bank
Chennai-based Repco Bank, a co-operative bank under the Union Ministry of Home, is waiting for the Reserve Bank of India (RBI) to come up with licensing policy, to join the group of commercial banks in the country. The bank is expecting an infusion of around Rs 100 crore in the next three years, to double its business from the present Rs 7,061 crore to Rs 15,000 crore by 2014-15, said a senior executive from the bank............
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