Monetary policy isn't a popularity contest

If the RBI cuts interest rates now, it will prolong the much-needed macro adjustment

 

......The RBI’s approach of not being wedded to a particular rupee level and sensibly avoiding its senseless defence by running down foreign exchange reserves has saved us so far from a bigger disaster. I know it is difficult for people, including some economists, to think of massive exchange rate depreciation as being positive, but in the kind of the macro cross-currents India finds itself, currency weakness is part of the solution, not part of the problem......

.......Frankly, the RBI should not be in the business of doctoring financial markets’ mood to make up for the government’s inaction and incompetence by ignoring the over 10 per cent consumer inflation just before an uncertain monsoon. If it attempts to do that by responding under political pressure, or as if in a popularity contest, or as a prisoner of market expectations, it’ll only be contributing to the very macro instability due to entrenched inflation it is trying to address.

Read..........

Ashok Lahiri to get another extension?

Grapevine has it that Executive Director in the ADB Manila Ashok Lahiri is getting one year extension. Extended tenure of Lahiri was to end in July. Earlier the name of Deputy Governor of the RBI K C Chakraborty was in circulation for the post.  

http://www.whispersinthecorridors.in/ReadArticle.php?id=14107&table=whispers

PRERANA SHIVIR for Reserve Bank of India (RBI) – Kolkata

Friday, 01st June, Mystic Managers was invited to conduct a workshop on Stress Management at RBI premises for RBI employees at Kolkata. Mystic Coach Abhishek conducted Yoga and Pranayam based theoretical and practical session for more than 25 participants. The most common reported ailments were Joint Pain, Indigestion, High Blood Pressure, Acidity and Obesity. Most of the participants were struck by the precise and scientific approach with which Abhishek explained & demonstrated Yoga postures. RBI has requested Mystic Managers to conduct another session in June itself for those who could not attend that day. Abhishek was ably assisted by Mystic Trainer Shibnath Basak. 

http://mysticmanagers.com/mysticpages/?p=35

Padmanabhaswamy temple-model security for RBI

The Regional Office of the Reserve Bank of India at Kochi could soon be provided a five layer security cover like the Padmanabhaswamy temple in Thiruvananthapuram in view of the increasing risk to its currency crest.  The Kochi police is understood to have worked out a detailed action plan for carrying out evaluation of the security measures necessary. RBI General Manager, C.V. George had at a security review meeting in Kochi last week asked for more security and also urged the police to put an end to unauthorised parking in front of the bank. He made it clear he did not want private buses halting near it either, fearing this could provide a cover for intruders. ...........

 

Read - The Asian Age

Rs 4 crore shredded notes seized in Bellary

.....Bellary superintendent of police Dr Chandragupta told HT the RBI’s normal practice was to shred old notes or those with some wrong prints and dump them in its yards. Such notes were used for paper making, which Sreenivasa did, he added. “However, a team has been to Indore to verify the facts given by him. We have been in touch with the RBI and they have the same opinion of the factory owner.....

Read - Hindustan Times

15 of 21 bankers take fake bill for real

It happened at a recent training programme attended by managers of urban co-operative banks in the state 

Bangalore : If you think counterfeit notes can't easily make it to our banks, then here's a shocker for you. A test conducted during a recent training programme for bank managers saw 15 out of the 21 participants approving a fake note of Rs 500 denomination. The programme was organised at the Regional Institute of Cooperative Management to train managers of urban co-operative banks from different places in the state and to update them on banking-related issues, especially identification of forgery. The test was done in two rounds. In the first round a genuine Rs 500 note was shown to all 21 participants, and all of them approved it as original. In the second round, a counterfeit bill of the same denomination was shown, but 15 of them said it was original. “We were surprised by the outcome of the test,” said Phaneendar B N, a forensic expert on documents and handwriting who was one of the trainers at the programme. “We gave each of them two notes to examine as they deal with such situations everyday. Only six of them managed to identify the counterfeit.” The officials failed to detect the fake water-mark, a fake embossing of the number 500 behind Mahatma Gandhi's image below the number 500, fake silver stick, and a fake superimposing image of number 500 above the national emblem. “If this is the situation in urban cooperative banks, how will it be in rural banks and cooperative societies,”.................

Read..................

Financial studies set to become part of school curriculum

......Mr Sukumaran added that the capital market regulator is taking the lead in co-ordinating with other regulators, such as the Reserve Bank of India, the Insurance Regulatory and Development Authority and others. “The biggest challenge is that the school syllabus has so many different subjects. We are trying to examine if financial education can be embedded into the existing school curriculum. If you are looking at comprehensive financial literacy then we need separate text-books,”.......

 

Read............

Financial inclusion progresses amid viability challenges

.....Financial inclusion is the process of ensuring access to appropriate financial products and services needed by weaker sections and low-income groups at an affordable cost by mainstream institutional players. The number of no-frills savings account with an overdraft facility has increased from 13,000 in 2010 to 15.20 lakh in 2012, according to a presentation made by Dr K. C. Chakrabarty, Deputy Governor, Reserve Bank of India, at a recent summit. As part of the financial inclusion process, banks have opened 3,171 rural branches in the last two years. To encourage banks to open branches in the rural areas, they are permitted to freely open branches in tier III to tier VI centres, subject to reporting to the RBI......

Read...........

My Mobile Payments launches mobile wallet service in India

.......“In a country like India where mobile phones are more widespread than the financial systems, mobile payment is the next big alternative payment method. MOM does all paperless transactions and it is in line with RBI’s vision of making 70 per cent of the financial transactions paperless by end of 2012.”.......

Read.........

India output growth flat, adds to BRIC straggler's gloom

.....That has spurred expectations the central bank will cut its repo rate by 25 basis points (bps) to 7.75 percent next Monday, adding to a 50 bps cut in April. But the RBI faces tough choices. Several economists warned that a rate cut without policy measures to reduce supply bottlenecks will drive inflation higher. "Monetary easing to boost aggregate demand without a supply response will prolong the fight against inflation," said Rajeev Malik, senior economist at CLSA Singapore.........

 

Read........

In another breather for telcos, spectrum mortgage gets RBI nod

........Other conditions put down by RBI include a robust methodology to discover the market price of spectrum and a margin to take care of downward fluctuations in prices and a credible valuation methodology to value spectrum reflecting the true realisable value of the airwaves. Further, in case of default by a borrower, the bank should have the unfettered right to sell, transfer, assign exchange or dispose of the spectrum, without any restraining condition, the ministry has said. Also, in case of cancellation or revocation or voluntary surrender of telecom licence before the realisation of full dues, the right on spectrum should be with the lenders, it has added.................

Read..........

Finance ministry preparing new policy road map for banking sector

......The North Block has already begun discussion with the central bank on the framework that will prescribe profit, capital adequacy, size and any other condition it deems fit for such banks to graduate into full-fledged banks. "We have written to the RBI asking for a clear roadmap for the smaller banks that want to expand," a senior finance minister official told ET...............

Read............

Free all e-banking transactions from charges

.....Addressing the chief executives of public sector banks and financial institutions here on Tuesday, the Finance Minister appreciated the recent decision taken by Oriental Bank of Commerce to waive all charges for Net-based real time gross settlement (RTGS) /national electronic fund transfer (NEFT) transactions up to Rs 1 lakh. He said, “I am confident that all the public sector banks would follow this excellent initiative. I would also urge upon the Reserve Bank of India to proactively work on this front and to see that all electronic banking transactions are possible without any charges being levied.”......

Read............

Banks told to cut NPAs

..............“I urge you to deploy various tools at your command for containing and rolling back NPAs in accordance with the guidelines of the Reserve Bank of India,” .................

Read........ 

Public sector banks - 2: Brazen quixotic and thoughtless directives from Delhi

....Notwithstanding the fact of substantial private shareholding in PSBs and the managerial autonomy  granted to them in 2005, the central government’s power to give direction to banks in regard to matters of public interest, after consultation with the RBI derived from the Banking Companies (Acquisition and Transfer of undertaking) Act 1970—in short Bank Nationalisation Act 1970—remains intact.The nature of consultation with the RBI is not clear nor is it clear whether the government could overrule RBI’s advice in matters where the RBI is professionally competent. Be that as it may, in the recent past, the ministry of finance, Department of Financial Services (DFS) has issued a number of directions, advisories and directives to PSBs........

Read...........

The RBI needs to act

............There is also a strong case that the RBI should be ready to act in anticipation of a possible catastrophic event emerging from Europe. The implications of a disorderly exit by Greece from the euro for the banking and credit system are far from clear. If credit were to dry up across the international financial system, as it did following the collapse of Lehman Brothers in 2008, the RBI should be ready to cut rates sharply. After Greece’s next round of national elections, the future path of the euro will become clearer; but they are scheduled for Sunday, and the results may not be known in time for Monday’s credit policy. The RBI is, thus, faced with a dilemma.............

Read............

FE View: Up to poor RBI now

..........They are stuck because of what, in short hand, is called 'policy paralysis' – the government's inability to give corporates land, to get coal allocation, environment clearance, and so on. How an interest rate cut by RBI can fix this is anybody's guess. Don't hold your breath

Read..........

RBI cutting rates not the right solution now: HSBC

.....In my view, it wouldn’t be the right solution to the growth problem because that has to come from supply side reforms, from broader structural reforms. But you could argue that there is somewhat more pressure on the RBI to deliver a rate cut. So, I would say that the possibilities of a rate cut are quite high this time around......................

Read..........

Banks' CRR cut demand gets government support

...........Interestingly, SBI’s demand for CRR cut was also supported by the government, owner of the public sector banks. “Banks are saying the best way is to cut CRR. This is also appropriate from the point of view of Basel-III. Banks can pass on the benefits to customers. As owner of public sector banks we can say banks would welcome a one percentage point cut in CRR, but ultimately the decision will be taken by the Reserve Bank of India. Unless interest rates are lower, there is difficulty in having higher growth rate. Today higher interest rate is feeding into inflation,” Financial Services Secretary D K Mittal said.................

Read...........

Why RBI should lower policy rates

.....The data tell us that while the economy has slowed down, prices continue to be sticky. The RBI did say in the past that it would not mind sacrificing a bit of growth to bring inflation under control. But the growth numbers for 2011-12 would surely have been a source of discomfort to RBI. In a recent interview, the RBI Governor, Dr D. Subbarao, pointed out that given the inflation dynamics in the economy, 7 per cent may be the potential growth rate. The implicit argument is that 7 per cent growth would bring down inflation to more acceptable levels. This approach, of effectively curbing growth, delayed the rate-easing cycle by almost two quarters, before its fallacy became evident......

 

Read.........

Cut lending rates for recovery

......We hope the Reserve Bank of India (RBI) will continue to ease to support growth on June 18. Given April 17’s 50-basis point cut, it may be too much to expect another repo rate reduction, especially as RBI had warned that the room for further easing was limited. No matter. It is just as critical that RBI Governor D Subbarao cut the cash reserve ratio to normalise money growth. After all, until liquidity improves, banks will find it difficult to cut lending rates even if the RBI cuts policy rates. Unless lending rates come down, growth will surely fall short of our modest 6.5 per cent this year, forget the RBI’s 7.3 per cent. What about inflation? We do expect it to pierce.................

Read...........

S&P's unfair comparison

This refers to the report “India may be the first fallen BRIC angel: S&P” (June 12). There may be some substance to the warning signals contained in the rating agency’s report. But the agency has done a disservice to players in financial markets – who still factor in the views of Standard & Poor’s (S&P) in their decision-making process – by openly airing partisan political considerations of its rich masters in a report that should have been a professional assessment of financial stability aspects. In terms of country representation or share in world GDP, Bric (Brazil, Russia, India and China) economies form a small group and India should not be too bothered about the kind of comparisons S&P has made. The rating agency could do well to infuse some standard in its assessments that should apply uniformly to similarly placed nations. It is better to compare comparables. Finally, India should have its own rating agency of international repute. Finance ministry releases alone will not be enough to counter “judgments” like the one being passed by the extended arms of external interests.

M G Warrier Mumbai

...and dubious timing

The timing of S&P’s report makes one doubt the rating agency’s “objective”. The issues of dual power centres in the government and political roadblocks to “so-called” reforms are not new — we have been facing these for almost eight years. There is no apparent or immediate trigger for the rating agency to come out with such a report.

N Ramamurthy Chennai  (BS)

The story of India’s falling forex reserves

Echoing former Reserve Bank of India (RBI) governor C. Rangarajan, Ashima Goyal, a member of the central bank’s technical advisory committee, has called upon RBI to use foreign currency reserves to support the rupee................

Read............

No-frills accounts rise over two-fold in last two years

.........The 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..................

Read...........

Credit cards need better regulation

....Who will come to the rescue of the aam aadmi? A bank cannot be allowed to suck the blood of the common man in the form of interest. It will not be out of place to mention here the RBI directive on interest rates. It stipulates as follows: “Though interest rates have been deregulated, charging of interest beyond a certain level is seen to be usurious and can neither be sustainable nor be conforming to normal banking practice. Boards of banks have, therefore, been advised to lay out appropriate internal principles and procedures so that usurious interest, including processing and other charges are not levied by them on loans and advances.”.....

Read.........

RBI asks banks to allot unique customer IDs

............The RBI said that increasing complexity and volume of financial transactions require that customers do not have multiple identities within a bank, across the banking system and across the financial system. To overcome this, it is important to pool information pertaining to different account holders in a centralised database.

Read.............

Gold loan firms to form self-regulatory body

Gold loan companies, which have been under the regulatory scanner for alleged malpractices, are coming together to form a self-regulatory organisation (SRO) to adopt fair-trade practices, and also to represent their case better with the Reserve Bank of India (RBI).......

Read........

JK Bank surpasses target in priority sector lending

.........The meeting under the chairmanship of DDC, Kupwara, reviewed achievements under Annual District Credit Plan 2011-12. MLA Lolab, Abdul Haq Khan, MLA Langate, S A Rashid and representatives of Reserve Bank of India and NABARD were present in the meeting.........

Read........... 

RBI's holding of gilts rising

.......Ever wondered how the government borrowing programme sails through so easily? Well, the RBI lends a helping hand. The RBI's holdings in gilts, or government bonds, have risen by almost two percentage points to 14.4 per cent in the six months ended March 31, 2012. The holdings have trebled from lows of 4.8 per cent as of March 2008......

 

Read............

CBI court permits Ketan Parekh to go abroad again

A special CBI court in Ahmedabad on Tuesday granted tainted stock market trader Ketan Parekh, prime accused in multi-crore securities scam, permission to visit United Kingdom (UK) for two months. The permission was granted by additional chief judicial magistrate H S Khutwad based on a application by Parekh who is also main accused in the Rs 1,200 crore scam in the Madhavpura Mercentile Cooperative Bank (MMCB) here, which has led to closure of the bank. The RBI had recently canceled the banking licence of the MMCB, nearly 11 years after the multi-crore scam came to light.........

Read..........

Job alert: SBI to hire 9,500 employees

The country's largest bank SBI has said it plans to hire 9,500 employees this fiscal and its main thrust will be on retail banking in the coming years.....

 

Read..................