A reformer’s plight

......It is ironical that the original reformer Dr. Singh-led UPA-II Government has to be constantly reminded by none other than the Reserve Bank of India (RBI) on the need to keep “the fiscal house” in order. Control fiscal deficit, go for market-led fuel price so on and so forth. The governor of the central bank has been continuously pleading with fiscal mandarins, even as critical macro numbers (be it inflation or industrial output and trade figures) have begun to show disconcerting signs. Surprisingly, every one — from common man to the industry and the politician — has berated the RBI for playing the ‘spoilsport’ and painted it as a villain! ........

Read - The Hindu

Revive the idea of a Gold Bank - S.S.Tarapore

.......Is a Gold Bank feasible? An alternative approach would be to set up a Gold Bank, but the mere mention of a Gold Bank gives apoplexy to influential people. This was a seminal idea developed, in 1992, by S Venkitaramanan, the then Governor of the RBI and the proposal was incorporated in the Union Budget for February 1992. It is unfortunate that Machiavellian tactics were resorted to by some RBI officials to scuttle the proposal. Opponents of a Gold Bank -- and there are many even today -- argue that mobilising gold through Gold Bonds and using this gold to raise foreign currencies in international markets is neither feasible nor effective. Again, it is argued that if a Gold Bank were feasible, the private sector would have set up such a bank. Furthermore, it is felt that if such a bank is set up by public sector banks it would be a moribund bureaucratic institutions needing heavy subsidy from the government and the RBI......

Read - FPJ

Banking on gold

There is an understandably desperate tone to the Reserve Bank of India (RBI) Deputy Governor, Dr K. C. Chakrabarty's recent exhortations to the public against the practice of giving gold as dowry or as religious offering. It springs, perhaps, from the recent tendency of Indians moving away from parking their savings in financial instruments. During 2011-12, bank deposits grew by Rs 701,110 crore, which was less than the Rs 715,140 crore in the previous fiscal, notwithstanding interest rates being raised sharply on both time and savings deposits. Also notable is the fact that nominal incomes in the economy grew and the public propensity to save did not diminish in any significant manner........

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Treasure gold

In ‘‘A gold medal for Subbarao’’ (Business Line, July 27), the author mentions that the World Gold Council in 2011 refers to a domestic stock of 18,000 tonnes of gold in India. The RBI should persuade the Government to understand the significance of this treasure lying idle in the country, and put pressure on the powers that be to put at least some 10 per cent of this to productive use in the next five years. This will reduce the country’s gold import bill by 50 per cent. This can be achieved by:

Introducing gold-backed financial instruments which are not dependent on imported gold;

Bringing a portion of household gold stock by offering some instrument like ‘Gold Bond’, backed by government guarantee to return solid standard gold at the time of redemption, which could be, say, after 10 years and a small return in the interregnum;

Arrange for infrastructure, technology support and linkages for gold refining and certification facilities of international standard;

The RBI and the Government could consider even deficit financing for procurement of domestic gold as this could be the beginning for adopting a partial ‘Gold Standard’.

- M. G. Warrier Mumbai (HBL)

Muthoot Finance hit by RBI gold loan cap

The Reserve Bank of India’s (RBI) clamping down on gold loan companies by putting a cap on the loan-to-value (LTV) ratio has impacted the growth of Muthoot Finance, India’s largest gold loan company. For the first time, the company has seen its gold loan outstanding decline by 5% to ...............

Read - Hindustan Times

Coin traders' are taking advantage of the shortage

Newspapers advertisements ' Short Changed' by ' Jago Grahak Jago' launched by the Union Ministry of Consumer Affairs awakening people to insist on change instead of accepting candies and chocolates from shopkeepers due to coins shortage are a waste of public money. Instead, the Department of Consumer Affairs and Security Printing & Minting Corporation of India ( SPMCIL) should co- ordinate among themselves to ensure sufficient coins supply. Coins are being sold at high premium. These govt depts should co- ordinate with the RBI for the supply of coins and not allow these `` coin traders'' to flourish.

- Anshuman Gaikwad, Goregaon (FPJ)

Town Hall meeting with customers

Of RBI and Milton Friedman

........Such fiscal dominance has obviously been a problem. But the Indian policy world has to also recognize that India cannot maintain growth on a sustained basis as long as inflation continues to be in the double digits, one of the highest such rates in the world. It is time to listen more carefully to what Friedman said many decades ago............

Read - Mint

Inflation fears, government sluggishness to force RBI not to cut interest rates

Reserve Bank of India Governor Duvvuri Subbarao has tried his best to downplay expectations of an interest rate cut in an economy that has the toxic mixture of slowing growth and high inflation, but there are outside chances of a reduction if he decides that slumping global demand and turmoil in world markets could pull down local economic growth rates further..........

Read - ET

RBI and the drought factor

....... “However, both headline and retail inflation rates are rising, which have a bearing on inflation expectations. Future actions will depend on a continuing assessment of external and domestic developments that contribute to lowering inflation risks.” The unexpected development of a failed monsoon has only complicated this choice. So what will it be? Will RBI play to the gallery, or stay focused on battling inflation?...............

Read - Mint

Opportunity in despair

.......We face twin challenges as an economy. First, our growth rates are slowing down and the investment cycle has more or less broken down. Secondly, domestic consumption has led to inflation sustaining at over six per cent, which has led to RBI keeping interest rates high. Thus, the government needs to contain consumption and boost investments. Fiscal consolidation is imperative from the government to move the needle on the inflation front, to nudge RBI to start cutting interest rates. On the other hand, to kick-start the investment cycle, it would be critical to bring clarity on policy measures, especially for sectors like power, telecom and mining. This would make investors feel comfortable that after having invested/or committing significant capital, policies are stable enough for them to earn reasonable returns.......

Read - BS

Coping with the unknowns

The central bank is likely to wait for an end to policy paralysis - just like everyone else

......In the circumstances, does the RBI hike rates (and/or CRR), stay put, or cut? A hike is very unlikely. Cuts, if they happen, are likely to be nominal. Though the RBI can do nothing about food prices, it could be arm-twisted to keep rates high due to monsoon failure.......

Read - BS

RBI’s choices in an inflationary vortex

.....On its part, the Reserve Bank of India (RBI) has made it clear that administered prices of petroleum products must be increased to reflect their international prices. Even if it results in higher overall inflation, such increases are imperative to lower the demand side inflationary pressures created by excessive fiscal expansion. In reality, it is most likely that fuel price revision, especially for diesel, will take place in the coming weeks and WPI inflation will, consequently, rise. How should the monetary policy react then? ........

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The great RBI dilemma: To cut key rates or not

The Reserve Bank of India will make known whether it has opted for monetary easing and benchmark rate cut tomorrow when it announces the quarterly review of its monetary policy. A complex macroeconomic scene and contradictory signals from economic parameters that the RBI monitors regularly have made the rate cut decision tricky..............

Read - DNA

Expect the unexpected from the RBI

......The market is looking at the wrong set of figures in not expecting rate cuts. The central bank is likely to look at the broad macro environment on the domestic and global front and cut the repo rate by 50 bps even as it lowers the GDP growth forecast to 6.5% levels from initial April forecasts of 7.5%. A repo rate cut of 50 bps will bring it down to 7.5% from 8% and at this level, it will be around average inflation expectations of 7% to 7.5% for full year 2012-13. An economy that is slowing considerably from growth rates of 8.4% seen in 2010-11 to 6.5% for 2011-12 and 2012-13 can live with negative real interest rates......

Read - DNA

Guessing game on RBI rates

Mixed views abound on whether RBI governor Duvvuri Subbarao will spring a pleasant surprise in the form of a rate cut during Tuesday’s first-quarter monetary policy review. Many feel that the Reserve Bank will maintain a status quo on key monetary policy rates because there has been no significant moderation in inflation. However, a few believe that the RBI may bring down the cash reserve ratio (CRR) to address the economic slowdown, which is continuing to weigh on corporate performance. The optimists also believe that the apex bank’s guidance will be much less hawkish..........

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All eyes on RBI guv: will he cut rates tomorrow?

Home loan borrowers, business leaders, economists and policy makers: all seem to have one question in common: Will the Reserve Bank of India (RBI) governor D Subbarao announce a cut in interest rates on Tuesday?.............. 

Read - Hindustan Times

Mobile banking deals treble to Rs 286 cr in May

........"Even though the value and volume are increasing on month on month basis, the growth rate is low when compared with the number of bank accounts and the vast mobile subscriber base of more than 900 million," said Harun R Khan, Deputy Governor, RBI in a speech on Financial Inclusion recently. This indicates that banks are yet to fully exploit this technology even for their existing customers, he said adding that RBI has provided policy framework for a collaborative relationship between banks and mobile network operators...........

Read - BS

Over Rs 2,400 crore lying in inoperative bank accounts: RBI

........According to RBI, there should not be any charge for activation of an inoperative account and the bank's interest on savings accounts should be credited on regular basis whether the account is operative or not. If a fixed deposit receipt matures and proceeds are unpaid, the amount left unclaimed with the bank will attract savings bank rate of interest, the RBI told activist Subhash Agrawal in response to his RTI query...........

 

Read - BS

RBI submits affidavit on Andhra MFI act

....."NBFCs being regulated simultaneously by RBI and State Government will result in dual regulation thereby adversely affecting the functioning of the NBFC-MFIs and the interest of the public," RBI said in an affidavit filed in the court. This was in response to a writ petition filed by some MFIs questioning the legal validity of AP MFI Act. "In case of NBFCs the RBI has exclusive power to regulate and supervise them. The provisions of the impugned Act are ultra virus the constitution of India so far as it deals with NBFCs," it added.......

Read - BS

.......In its first formal submission on the controversial issue last week, the RBI has told the Andhra Pradesh High Court that "any overlap or conflict is not in the interest of effective regulation, both from the point of view of the regulators and the regulated entities".........

Read - ET

Extending RTI Act to public sector banks involves systemic risk - M.R.Umarji

.....Public sector banks established under an Act of Parliament are owned and controlled by the central government, but carry on this business of banking by raising deposits from the public. They are not dependent on any budgetary allocations for their businesses. Although these banks collect public deposits, they are accountable to the RBI and not to the public for prudent use of such deposits. Ordinary citizens seeking any information from these public sector banks are incapable of making any assessment on whether the banks are utilising the public deposits prudently and hence the basic objective of the RTI Act to make public authorities accountable to the public for use of public funds is not applicable to public sector banks. .......

Read - ET

ATM transaction charges may be lowered soon

........... in a meeting on 26 July of all banks and representatives from the National Payments Corporation of India and the Reserve Bank of India, it was decided to bring down the transaction charges gradually. “For the time being, it has been decided to bring down the rates in phases. First bring it down to Rs15 for withdrawal and Rs. 5 for balance enquiry from 1 August. And then reduce rates gradually in a 5-6 months horizon instead of drastically bringing it down in one shot,”..........

Read - Mint

How much of the capex slowdown is due to RBI tightening?

 “The Reserve Bank maintains that interest cost is only one of the several factors that have dampened growth, and the increase in policy rate by the Reserve Bank alone cannot explain the investment slow down.” This defensiveness is a bit odd—isn’t slowing growth and demand in the economy the whole point of raising rates? And if there are other factors holding back growth, shouldn’t the central bank take account of them and adjust its monetary stance accordingly?.........

Read - Mint

If not as IIMA chief, Barua ok being a faculty

Ahmedabad: As Prof Samir Barua’s term of directorship at one of the world’s best B-school comes to an end in October, speculations are rife about his plans to settle down for a bigger role in Reserve Bank of India (RBI) and Securities and Exchange Board of India (Sebi). However, putting a lid over all rumours, Barua said that he intends to return to IIMA’s classrooms as a faculty member. This possibility is likely, if he doesn’t get a second term as the director of IIMA, he added.

The Daily Bhaskar

'CCI will not intervene in functioning of sectoral regulators'

Competition watchdog CCI will not put road blocks in the functioning of other regulators like TRAI and the RBI, but will only intervene if the policy decisions hamper competition in the market...........

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Norms on anvil for proper use of for CPSEs' surplus cash

........The Reserve Bank of India (RBI), Securities and Exchange Board of India (SEBI), UTI Mutual Funds and SBI Mutual Funds have made presentations to the committee in regard to investment of surplus funds by CPSEs. The RBI has suggested to the panel various investment options such as mutual funds and government securities wherein these PSUs can invest their money, the official said..........

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