Monetary policy evokes unease - K Kanagasabapathy

.....While one of the Deputy Governors who is in charge of monetary policy indicated that there was room for reducing policy rates, another Deputy Governor, though not in charge of monetary policy (but a member of the Monetary Policy Advisory Committee), indicated that interest rate is not a significant factor in explaining slowdown in investment and economic activity. Even as the market was miffed by such contrary signals, the Finance Minister, through his interactions with the media, almost confirmed that the RBI will take actions (to ease policy further), and even directed public sector banks to follow up with immediate cuts in lending rates. What he forgot was that after his official nomination for the President’s post, his voice as Finance Minister had lost its weight. After the announcement of the policy, he was apologetic that the Governor need not consult him for mid-quarter policy reviews, further conveying the impression that if it had been a quarterly or annual review, the RBI would have been obliged to follow the Government’s direction! Two things emerge out of this. It is well known that, legally speaking, the RBI is not that autonomous with respect to monetary or banking policy.....

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Reforms at RBI: A route to effective monetary policy

The Public Debt Management Agency of India Bill seeks to take away the debt management function from the Reserve Bank of India (RBI) and assign it to an independent agency. This will eliminate one of the many conflicting interests of the central bank and is in keeping with the best practice scenario offered by the most recent studies on optimizing the role of the central bank..............

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Basu wants PM to take charge of Finance Ministry

Chief economic advisor Kaushik Basu wants Prime Minister Manmohan Singh to take charge of the finance ministry after Pranab Mukherjee moves to Rashtrapati Bhawan saying that he is an extremely capable person. "The Prime Minister is a trained economist... He was there in the 1991 reforms ... (although) it is a political decision... who come and goes... but one thing is for sure that he is extremely capable," Basu said in an interview...............

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Exporters Express Worry Over Low Credit Supply

.....The credit flow should be ensured, then only the exports would be positive...Last month they were negative. The bankers have to have a look at it," he said, adding that apart from driving up credit, others issues such as relaxation in rebooking or cancellation of forward contracts and curbs on the exporter earners' foreign currency account (EEFCs) were also discussed at the meeting. With the rupee touching an all time low of Rs 56.60 to the dollar today, the issue was discussed during the meeting, and exporters asked for measures to bring some stability in the currency by checking the volatility, Ahmed said. RBI Deputy Governor H R Khan chaired the meeting, and several top officials from banks including Bank of Baroda, Bank of India, Standard Chartered Bank and dedicated agencies such as Exim Bank and ECGC (Export Credit Guarantee Corporation) were present.

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Dharna against co-op banks functioning

.....Addressing the dharna, Ramesh Srivastava alleged that money of common men deposited in co-operative banks was mismanaged due to the careless attitude of the concerned department. Corruption, despite regular inspections, is the main reason behind the problem. He alleged that the concerned department and the RBI were only completing the formality of inspection. He also mentioned various other factors that were marring the functioning of these banks.........

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Outlook downgrade of FIs unwarranted: Mittal

.....Pointing to concerns pertaining to the lack of capital with public sector banks (PSBs), Mr. Mittal noted that the issue of crisis of capital in Indian banks was highly over-rated as banks in India park about 28.75 per cent of their deposits with the government and the Reserve Bank of India — 24 per cent in the form of SLR (statutory liquidity ratio) and 4.75 per cent as CRR (cash reserve ratio). This, he said, was “a practice which is followed nowhere else in the world but in India and, as such, there can be no crisis of capital.”

Read - The Hindu

By doing nothing, Subbarao speaks his mind

Dr. Duvvuri Subbarao is a mild-mannered man. He speaks softly, listens carefully and acts in measured steps. Until now, that is. The RBI governor’s decision earlier this week to keep interest rates on hold in the face of growing clamour for a rate cut tells us that underneath the soft exterior hides a tough central banker...............

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Cut can hurt

........One possible explanation for what might have given RBI the determination to keep interest rates unchanged could be the fear of an even sharper volatility of the rupee if it did. For a central bank, which explicitly targets the stability of the exchange rate and faces a shrill clamour for selling dollars from its reserves, cutting rates could have created an equally unpleasant situation in the coming days. The same industrialists who are asking for rates cuts today would have demanded that the RBI prevent a rupee depreciation, without appreciating the link between the two..............

Read - Indian Express

Bank business correspondent models need to have controls to safeguard clients’ interests

.....The RBI must therefore revisit KYC norms immediately, adapt it in the light of what happened in 2010 in AP microfinance and thereafter attempt to ensure the implementation of the revised KYC norms in a rigorous manner by all concerned institutions including banks and BCs and their sub-agents.......

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Now, send money home more frequently

.....Those using the money transfer service largely belong to the working class. They try and send their savings when the rupee is weak, say experts. This mode is advantageous for those who do not have a bank account or whose work sites are far away from cities or towns, such as an offshore oil rig. Or, the beneficiaries might be living in remote villages or towns, which might not have access to net banking or a bank branch might not be close by. “RBI's move would also help those who receive salary more frequently; for instance, salaries are paid every week in the US. NRIs there would be able to send money more frequently,” ......

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Blame Game

The present state of the stock market is pitiable. The market was slowly showing some improvement in the past 3-4 days in the expectation that the RBI will ease the market condition to a higher level by cutting commercial bank interest rates. But contrary to our expectation, the RBI has not done anything except blame the government that it has not taken any measure to improve the economy. The government, on the other hand, blames the business community and the latter blames commercial banks. But commercial banks say they cannot do any favour to the business community as the RBI is controlling the interest rate. Blaming each other will not solve any of our problems. So long as this condition prevails, we cannot find a remedy to revive the economy.

- V VENKITASUBRAMANIAN  (ET)

Right on the money

Subir Roy is a bit unfair to the Reserve Bank of India (RBI) in his analysis of the economy (“RBI lets everybody down,” June 20). Monetary policy has to take care of money supply in the economy. It cannot be blamed if public confidence in the economy is low. Money does not pour in just because cost of borrowing is low. It pours in if the rate of profit is higher than the cost of borrowing. .............

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Beware of fictitious offers promising money: RBI

....In the appeal circulated through the Uttarakhand government's directorate of information and public relations, the RBI has asked the people not to get trapped in such offers and said the best way to avoid such offers is to ignore such e-mails or telephone calls received from unknown persons. ....

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Gold Financiers’ Growth Stalls as Rules Tighten: Corporate India

..........The Reserve Bank set up a panel headed by K.U.B. Rao to analyze the implication of gold imports for financial stability, price trends and the role of non-bank finance companies in influencing rates. The panel is expected to submit its report by the end of July, the central bank said. “All the uncertainty and speculations on whether there will be more regulations will be over in the next two months after the RBI comes out with its report on gold,” ...........

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Gold loan companies insist on efficient KYC practices after RBI missive

Strict 'Know Your Customer' (KYC) norms, prescribed by RBI, are compelling gold loan companies to put in place better customer identification practices. Now, the companies are asking customers to produce Aadhar cards for identification purpose. Leading player Muthoot Finance has already implemented it and other major companies are expected to follow suit..............

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