Pushing the RBI

The word “balancing” seems to be a favourite of Reserve Bank of India Governor D Subbarao. Consider the number of times he has used the expression “balancing” growth with inflation management in his monetary policy speeches. So it wasn’t a surprise when, last week, he sought to once again “balance” his views about the finance ministry’s equations with the central bank. A day after advising the ministry to demonstrate exemplary corporate governance by exercising its ownership rights through bank boards, Dr Subbarao said the RBI and the government were not adversaries, that disagreements were natural, and that he would worry if there was complete agreement. Such nuancing of views may be a compulsion of the high office he holds, but the message underlying them comes through loud and clear: North Block has no business being in the business of micro-managing banks................

Read - BS

I wish I was born 15 years later...........

It is indeed remarkable that Dr Subbarao with all his academic achievements (Director, IIT's Gold Medal, First rank in his batch in IAS, later a Ph.d) and then excelling in his career in many positions which he had come to occupy, nay, adorn (proving that he is not merely a theoretician), he is extremely modest. His modesty is genuine unlike that of some of his predecessors. His integrity is another remarkable thing as we have now come to know his file notings/letter on the pricing of 2G Spectrum. The only fault in him as I see is that he is too gentle and too good for this workaday world. He has to be like a Rajarishi when it comes to punishing, as a part of his duty, those who deserve it without feeling happy about it. How I wish I was born 15 years later than I did so that I would have had the privilege of working with him.

- A. Chandramouliswaran, Former Executive Director 

RBI to soon launch e-learning package to address ECB queries

The Reserve Bank will soon launch an e-learning package as well as establish nodal offices for banks to address issues related to external commercial borrowings. "The RBI will create nodal offices for dealers. The authorised dealer must get their clarification with nodal offices (in their region) before approaching it," said P K Raut, General Manager, Foreign Exchange Department, RBI in an event organised by industry body Assocham here today.............

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RBI to issue Rs 10 and Rs 50 bank notes with rupee symbol

....The new banknotes bearing the signature of RBI Governor D Subbarao will have rupee symbol with inset letter ‘L’, in the Mahatma Gandhi Series-2005. The year of printing 2012 will be printed on the reverse of the bank note.......

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PNB cheque truncation system in Kerala

....As per the cheque truncation system, there will be only one clearing in South India based at Chennai. All the clearing houses in Kerala and other southern States will be connected to RBI clearing cell at Chennai. Thus the cheque clearing process will be quicker and more effective, ........

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No loan growth target for PSBs

......Now, the finance ministry wants banks to focus on increasing their profitability and improving the asset quality. As a result, some new parameters would come in. The finance ministry is holding meetings with each PSB bank chairman to finalise the targets. “The focus this time is on increasing the profitability,” said a PSB chairman and managing director. “We have to emphasise on parameters such as return on asset, net profit per employee, cost-to-income ratio, and staff ratio in branches, among others.”..........

Read - BS

PIL asks if Parliament can enact co-op bank norms

AHMEDABAD: Can the Reserve Bank of India (RBI) regulate banking businesses of co-operative banks? A PIL filed in the Gujarat high court raised this question and claimed that Parliament could not legally enact such laws, which interfere with a state subject. This PIL has been filed in the aftermath of RBI's decision to close down the Madhavpura Mercantile Co-operative Bank Ltd. ............

Read - TOI

Breaking News:

 

Pragati Sahkari Bank penalized

....Pragati Sahkari bank was faulted on the counts of director related advances.The UCB was also found to grant of unsecured loans beyond the stipulated ceiling.Last but not the least the bank was found not reporting frauds to Reserve Bank of India......

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When banks slip

...........In India, anti-money laundering charges are supposed to be investigated by the Enforcement Directorate with inputs from agencies like the Intelligence Bureau and the Financial Intelligence Unit. Yet there are no institutional mechanisms for the sharing of data between these units and even less with those outside, like the RBI...............

Read - Indian Express

Make money on debt

Mirror, Mirror on the wall....... Will interest rates rise or will they fall?

Would it not be fabulous if we could gaze into a crystal ball and decipher what the central bank`s next move would be? Unfortunately, or probably fortunately, such wishful thinking comes alive only in fairy tales. In reality, ambiguity is more the norm than the exception. .......

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RBI directive

THIRUVANANTHAPURAM : The Reserve Bank of India (RBI) has directed the Pathanamthitta-based Popular Finance to not collect deposits from the public. An official press note said here on Thursday that the institution could not collect deposits from the public under Section 45 of the RBI Act. Collection of deposits in violation of the section would invite punishment including imprisonment. People who deposited money with such institutions would be doing so at their risk.

The Hindu

RBI looking into HSBC issues raised by US Senate

The Reserve Bank of India is looking into the issue of non-compliance of anti-money laundering norms by the Indian staff of HSBC raised by a US Senate Committee, a senior finance ministry official said on Thursday. "I am confident that RBI is looking at it (HSBC issue). I am aware of it. They are very conscious of the issue," department of financial services secretary DK Mittal told reporters in New Delhi.

He said the finance ministry would assist the RBI with the required inputs......

 

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Banks should not be micromanaged by finance ministry

.......So, what about the autonomy of RBI itself? It was not so long back that former finance minister Pranab Mukherjee almost announced the monetary policy a good half an hour before it was unveiled, while speaking at a public event. That says it all. The government must not micromanage banks for the sake of good spirit of an evolving financial system. By doing so, it is also undermining the efficiency of managements in state-run banks, who are professionals with no less ability and conviction than any of their private-sector counterparts to execute business decisions. Finally, India has a central bank. It has time-tested skills sufficient enough to know when and how to do its job. Let’s not spoil the broth with many cooks.

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Indian eco to grow at slowest pace in 10 years

....Economists still believe it will have to reduce rates in coming months, though many have postponed the timing of the next move. They now expect the central bank to keep the repo rate unchanged at 8.00 percent this quarter, before cutting it to 7.50 percent between October and December. The RBI’s hawkish stance on inflation could mean further delays in rate cuts, especially after it indicated at the June meeting that the burden is on the government to revive growth........

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RBI shuns foreign investors and derivatives in favour of structural ALM, says former Deputy Governor

Shyamala Gopinath believes market structure and regulation can be used to create ‘natural’ asset and liability management; approach is superior to managing risks with financial hedges. Central banks need to identify risk items related to the interaction of sovereign debt management, reserves management and monetary policy, and study their vulnerabilities in stress situations on a broad macro-economic basis, if they want to perform successful asset and liability management (ALM) on a national basis, according to Shyamala Gopinath, a former Deputy Governor of the Reserve Bank of India (RBI)..............

RBI shuns foreign investors and derivatives in favour of structural ALM, says former deputy governor - Central Banking

RBI take note: US ‘fiscal cliff’ will affect India too, especially bonds

....The RBI will have to watch out for the progress on the US economy in framing its own policy stance. If the US is likely to go into a mild recession in 2013, India will face its after effects. Revenues from IT service exports to merchandise trade will be hit, impacting the domestic economy. The Indian economy is in one of its worst phases with fourth quarter GDP growth at a nine-year low of 5.3 percent......

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Monetary easing needed to deal with global eco woes: ADB

"Policymakers (in Asia) may need to deploy another round of fiscal and monetary measures to safeguard economic growth and ensure that growth is inclusive," the ADB said in its Asian Economic Integration Monitor report. The report further said that with the weakening of the global economic conditions and uncertain prospects of recovery, the external environment for developing Asia is expected to remain difficult. It is widely expected that Reserve Bank of India (RBI) might slash key rates by 0.25% in its monetary policy review to be unveiled on July 31...............

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Decision on export proceeds only after talks with RBI: Mittal

The Finance Ministry will initiate talks with the Reserve Bank of India on exporters’ plea for continuation of the flexible regime on repatriation of export proceeds. This was stated by the Financial Services Secretary, Mr D.K. Mittal, at an interactive meeting on export credit organised by the Federation of Indian Export Organisations (FIEO) here on Thursday.........

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RBI may cut policy rates by 0.25 percent: Barclays

...........“While the uncertainties regarding the RBI’s near-term policy decisions remains considerable, we remain comfortable with our expectation of a further 100bp of cuts in the repo rate in FY 12-13 (including a possible cut in July),” ...................

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Growth below 7% acceptable; must focus on productivity: YV Reddy

High inflation and high interest rates could mean that growth may remain below 7 per cent for the second year running. But Dr. YV Reddy former Governor of the RBI told NDTV Profit that 6-7 per cent growth does not worry him and what we need to focus on is improving productivity in the economy

Telcos want RBI to relax external borrowing norms

....However, an RBI circular in June limited the scope of telecom companies to raise ECBs by including a clause on export earnings, which gives benefits in raising ECBs to firms with foreign exchange earnings. “Telecom companies don’t have substantial earnings in foreign exchange. This clause would limit their ability to raise ECBs,”........

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RBI, gripped by doubts, revisits classic inflation theory

.......At best, monetary policy may have a salutary impact on core inflation – that is, price changes in commodities, chiefly manufactures that are free from volatile elements, food and fuel groups. But, if the headline inflation stays at an elevated level over an extended period of time, as is now the case, monetary measures alone may not be enough. Both the government and the central bank may have to work in tandem to quell the price fever. At home, prudent budgetary policy and growth-promoting strategies can go a long way in lowering the inflation rate. As Chester Bowles, the famous American politician who had served as ambassador to India, observed, “Production is the only answer to inflation”. This is the role of government and then monetary policy can play a contributory role. But, as of now, the RBI is left holding the fort while the Centre dithers. No wonder then that inflation appears to be well entrenched in the economy.

Read - DNA

How to restore trust in banks?

....As former RBI Governor YV Reddy points out in his recent Per Jacobsson Foundation lecture delivered in Basel, we have to rethink the entire relationship of finance to society. We need stability, limits on financialisation and inclusion. Why is public trust in bankers shaken? Ordinary people feel that they are being made to bear the costs of the follies of bankers. In the very banks at the centre of the crisis, bankers still enjoy outsized pay packages. No banker or bank has been prosecuted for any of the lapses connected with the crisis; instead, regulators have been content to impose penalties without even disclosing the details of the malfeasance.......

Read - ET

Home Min bars three Iranian banks from opening India branches

....India, which plans to import 15.5 million tonnes of crude oil from Iran this year, has faced difficulty in finding banks to transfer payments to Iran ever since the Reserve Bank of India in December 2010 dismantled the 1974 Asian Clearing Union mechanism......

Read - Indian Express

PayPal India to play a larger regional role

.....Currently domestic trade operations are not allowed, pending licencing issues with the Reserve Bank of India. "Right now, we are in talks with the RBI, and what we are looking at is that hopefully within a year we should be able to resume domestic trade operations,"..........

Read - The Hindu

Govt plans group for cost-effective credit to exporters

.....The group will have officials of finance ministry, RBI, exim bank, export credit guarantee corporation (ECGC) and public sector banks apart from exporters from federation of Indian exports organisation (Fieo). First meeting of the group will be held next month.......

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79 SME units fall sick a day

....The Reserve Bank of India (RBI) declares a small scale industry (SSI) unit sick if any of the borrowal accounts of the unit remains substandard for more than six months or there is erosion in the net worth due to accumulated losses to the extent of 50% of its net worth in the previous accounting year......

Read - TOI