A former Reserve Bank of India Governor, while still in office, confided that he would never keep the government in the loop on most decisions of the central bank. But the then mandarins in the finance ministry never made it easy for him. They put pressure on him on a variety of issues since he invariably needed the ministry’s concurrence on policy matters. This particular governor got his way on most issues and, much to the chagrin of the officials, earned the reputation of preparing India for the financial crisis of 2008. In fact, he felt it was not necessary to meet even the finance secretary, the most senior official in the ministry, during his North Block visits. On some occasions, he would visit the capital just to meet the prime minister and would not even call on the finance minister. There were many critics who had a healthy disrespect for his domineering style, but nobody took him head on regarding his regulatory decisions. He overruled ministry interventions, backed by the quality of his decisions. Another capital market regulator or chairman of the Securities and Exchange Board of India (Sebi) would frustrate the finance secretary of the time by not answering calls or responding to text messages. Here again was a regulator who had turned around financial institutions, knew his domain well and refused to budge from decisions despite the government’s reservations. These are just two examples to show that regulators never had an easy relationship with the government ...........
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Tuesday, July 10, 2012
Reddy`s Libor reckoner
Peers lavish praise on Abid Hussain
How did former Governor of Reserve Bank of India Y.V. Reddy locate his moorings in the IAS? On the day he joined the service as Assistant Collector of Visakhapatnam, his boss and district Collector Abid Hussain straightaway entrusted to him adjudication of a dispute in irrigation and left on an appointment. The order prepared by Mr. Reddy was later signed by Hussain. That was not all on day one. Hussain that night asked Dr. Reddy to accompany him to a dinner in an elite circle. But, the latter turned down the offer saying he was not comfortable in such places. Hussain then warned Dr. Reddy ‘being anti-rich is as bad as being anti-poor’...............
The importance of being PK Tayal
....The DCA having done it’s bit and ‘compounded’ or regularised the illegality, RBI decided to play the perfect babu—it didn’t proceed on the benami share angle or the siphoning off funds and allowed Tayal to take over the Bank of Rajasthan since there was no pending investigation/charge against him. A decision it must have rued later since, over the years, it appointed an additional director on the bank’s board, a CEO, and even ordered a special audit of the bank’s books, after which the bank got merged. Though RBI did the wise thing by containing whatever problem the audit report revealed—RBI never made the report public—in order to avoid any sort of panic in the banking sector, Tayal managed to walk away with 1 ICICI Bank share for every 4.72 shares he held in the Bank of Rajasthan, directly or indirectly......
Public sector banks on branch expansion spree
.......Recently, the Reserve Bank of India relaxed the norms for branch licensing and encouraged banks to open more branches in tier-2 centres (cities and towns with a population of between 50,000 and 1,00,000). Despite these efforts, the penetration of banking services in the country is still low. An average branch services around 13,000 customers, indicating the demand for services and the potential still available. Nearly 60 per cent of the population does not have access to banking services, according to RBI reports.
Fibre tokens end coin shortage in Bagalkot town
BAGALKOT: Call it illegal tender, but the parallel currency of fibre tokens in denominations up to Rs 5 has solved the big problem of small change at a town in Bagalkot district. Shortage of coins had forced shopkeepers in Mahalingapur to hand out a chocolate or a toffee in lieu of change in a purchase made. Customers had no other option, but to grumble and accept whatever that came their way. But the new solution could be looking at sudden death if the central bank orders a crackdown on the parallel currency.............
RBI to try plastic currency in 5 centres
Notes of Rs 10 denomination to be distributed through the central bank's five regional offices
Read..........
Clearing Corporation of India launches trade repository for OTC Forex Derivatives
Open market operations will depend on liquidity situation: RBI
....."Depending on the liquidity situation, RBI will come with OMOs... we have indicated on a sustainable basis plus or minus 1 per cent (deposits). If it is beyond that, then we will consider (OMOs)," RBI Deputy Governor H R Khan told reporters on the sidelines of a National Housing Bank (NHB)event.........
Macro-economic stability will ensure low-cost housing: RBI
RBI sets cap on debit card usage fee
Can PM do What Pranab Could Not?
....With Pranab Mukherjee out of the finance ministry, the Prime Minister will also need to leverage his equation with RBI Governor D. Subbarao to bring down interest rates, give an impetus to investment and reverse the slide in the growth story. Mukherjee had an uncomfortable relationship with the RBI Governor and, despite his constant nudging, the latter, in the past one year, consistently refused to lower interest rates. Just 10 days before he demitted office (June 26, 2012), Mukherjee dropped enough hints to suggest that he wanted a reduction in interest rates, but that did not happen in the quarterly review of the monetary policy on June 18. The RBI will have to reduce interest rates to rev up the economy. It will not be an easy decision to take, for, it risks inviting the charge that it was deliberately putting roadblocks in Mukherjee's economy revival plans..........
Jain Irrigation & partners to invest Rs 100 cr in new NBFC
Small Ideas, Big Revolutions.
Jain Irrigation Systems along with other partners will invest Rs 100 crore to roll out a new Non Banking Financial Company (NBFC) soon for providing loans to farmers, a top official said. Last week, Jain irrigation had announced it has got RBI's permission to start a NBFC 'Sustainable Agro-commercial Finance Ltd (SAFL)'..........Read............
Bankers seek pro-industry measures from RBI
.... "A rate cut is not a panacea for all the pains of the economy. At the current inflation rate, I don't see any room for the central bank to cut interest rate. While the RBI can do something to ease money supply, the government should do everything to ease supply-side bottlenecks," .....
High inflation may restrain RBI from cutting rates: Rangarajan
Banking on debt
The latest figures on India’s external account released by the Reserve Bank of India point to medium term changes that underlie the weakening of the rupee. But the government’s response may not be the most appropriate............
A robust system in turbulent times
....A closer monitoring of banks is also required because “distress dependencies” between banks has risen. RBI’s analysis of the branch network of Indian banks reveals that the systemic importance “of the most connected” banks has increased.........
Bankers ask RBI to ease liquidity
....Top bankers Monday urged the Reserve Bank of India (RBI) to ease liquidity in the banking system to help revive industrial growth. Executives of leading lenders including State Bank of India, ICICI Bank, HDFC Bank, Axis Bank and Punjab National Bank met RBI Deputy Governor Subir Gokarn and requested for easing the liquidity.....
Rock bottom rates
....To the extent high interest rates, by eating into the operating profits of companies, have dampened business sentiment and the overall inducement to invest, the RBI’s current monetary policy stance may actually prove counterproductive.......
Clamour for remedial steps
A circumspect banking community today asked the Reserve Bank of India to at least bring down the cash reserve ratio (CRR) if not the policy rate as a way to crank up credit growth and kick-start the economy...........
Banks face RBI heat on no rate cut
The Reserve Bank of India (RBI) has come down heavily on banks for not cutting interest rates, despite a reduction in the policy rate by as much as 50 basis points (bps) in April. In the pre-monetary policy meeting with bankers on Monday, the central bank wanted to know the reasons for the failure of policy transmission..............
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