FinMin secy DK Mittal's grandstanding irks bankers, RBI

Two weeks back, a strong statement by RBI Governor D Subbarao on the government's dictatorial style of exercising ownership in state-owned bank triggered mixed reactions among bank bosses

...............Periodic cold war between RBI and the department of financial services is nothing new. But it always makes headlines whenever it surfaces. 

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"Micro management of banks"

"In a recent article on "Micro management of banks", Shri Vishvanathan, a brilliant banker who had served SBI with great distinction, has identified a few operational issues on which problems are likely to be encountered if Government were to micromanage PSBs and issue directives on such operational issues. One of them relates to classification of loan assets as NPAs which goes against the directives of the RBI. This is a serious matter and cannot be left unattended. Statutory auditors would have difficulty in determining whether a loan asset is to be classified as NPA or not on the basis of conflicting directives of Government/RBI. This would have an impact on the reckoning of even the Capital adequacy ratio of the bank. RBI would, therefore, have to take up the matter early with the Government ( if not already done) and the matter should be sorted out.  It would be advisable for RBI to tell the Government that they should leave such matters to the RBI and refrain from issuing directives on operational issues in future."

- A. Chandramouliswaran (via e-mail)

Poor human resource management practices in Indian public sector could lead to a serious setback

.....More than a year back, the RBI governor made a plea for a level playing field for PSU banks with enough freedom to hire executives and employees on competitive terms. This should have been seen in a wider perspective. Recently, the RBI too opted for recruiting short-term (for three years) executive interns on contract basis. The RBI has tried out most of the options like accelerated promotion, foreign postings, deputation to subsidiaries, assignment to higher quality training programme and paid holiday with family for its employees. As large disparities between the pay and perks in institutions with similar responsibilities across public/private sectors had not been appropriately addressed, the RBI’s new hiring scheme also did not attract talent.........

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RBI needs to come out clean on NPAs

............The RBI’s suggestion of a two-year “regulatory forbearance” for withdrawing the standard classification benefits needs an urgent recall. Notwithstanding this, the banks need to explicitly start recognizing these loans as NPAs as they have suffered considerable diminution in the realizable fair values of the securities assigned to cover them. They have necessarily to be recognized and also provided for entirely in the year of occurrence. It is certainly not correct to defer it to future years when the profits of subsequent years take the hit. The RBI shouldn’t venture into the realm of prudent and accepted international accounting practices by suggesting such deferrals.............

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Amid slowdown, Polaris aims to be among top 5 in financial tech

...........One of the biggest wins in India was with the Reserve Bank of India (RBI). Polaris’ end-to-end Intellect Core Banking System implementation at RBI includes system integration and maintenance of software for a period of 10 years and the deal is valued at $55 million........

Read - BS

Wipro gets core banking for NABARD banks

.....Considering that the recent regulatory reforms by RBI are expected to make the Indian banking scenario more competitive, this initiative will equip co-operative banks with cost effective technology and robust infrastructure to support their growth and help them keep pace. "More importantly it will change the face of rural banking by making e-banking facilities available to the rural customer," .........

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Coins worth crores of rupees are lying dormant in Mumbai's temples

Coins worth crores of rupees are lying dormant in huge hundis of Mumbai's over 5,000 temples, blocking coins' circulation as these hundis are opened every three to four months. This results in an artificial shortage of coins. To mitigate the shortage of coins, the Endowment dept of the Government should instruct temples to empty all their hundis once in a week and deposit coins in the bank for bringing it back into circulation. Maharashtra alone accounts for over 1.5- lakh temples, where coins worth Rs 20 crore are said to be lying dormant in hundis.

P S Shetty, Thane (West) - FPJ

Evergreen no more

......Last week’s recommendations show that the Reserve Bank of India is finally running out of patience. It needs banks to clear up these bad loans before they become a systemic problem. That, however, puts India in a tricky situation. Government-dictated targets – designed to fuel economic growth – are partly to blame for forcing the public sector banks to grow their books too fast in the first place. Now that the country’s economy is slowing, politicians will be pressuring banks to lend more, not less, and any restructuring that puts voters’ jobs at risk is bound to meet heavy resistance........

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Reserve Bank of India urges corporates to cut forex speculation

.......Large amounts of speculation by corporates had triggered huge moves in the Indian currency, prompting the central bank to impose curbs on foreign exchange derivative products, Reserve Bank of India Executive Director G. Padmanabhan said in a speech on Saturday that was published on the website on Monday. "The Reserve Bank believes that corporates should be concentrating more on their core business to generate returns rather than looking to generate alpha from diversifying into trading in forex markets," Padmanabhan said.......

Read - ET

When ‘animal spirits’ reigned

......Today, there are no ‘animal spirits’ to drive investments. With corporate profits, household incomes and government finances all under pressure, the domestic savings rate, too, has fallen. All this, even as the CAD has crossed 4 per cent of GDP. India, ironically perhaps, needs foreign capital more now than during its investment boom last decade! ........

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Loan recasts to get tougher for companies

..........More importantly, the RBI panel suggested to do away with regulatory forbearance regarding asset classification and provisioning in two years. If indeed that happens, banks have to make provisions for anywhere between 5% and 15% for any loan the moment it gets restructured. Currently, banks need to make a 2% provision on standard assets that they restructure, and a provision of up to 15% if the restructured loans turn bad. The provision requirement on restructured accounts should be increased to 5%, the panel said. RBI has sought feedback to the Mahapatra panel proposals until 21 August.......

Read - Mint

An SSC pass understands that inflation today has nothing to do with RBI

.....If you have a matriculation degree, you will understand that India’s inflation has got nothing to do with the RBI’s policies. Your inflation is largely international commodity price driven. Your local interest rate policies have got nothing to do with that. We have seen that inflation has remained stubbornly high no matter what Mint Street has done. You should have understood this one commonsensical thing,” .........

Read - DNA

Dr Subbarao, why give the economy an undeserved rate cut?

It’s no fun being Duvvuri Subbarao. Every month everyone looks to him to deliver interest rate cuts, and he is damned if he does, damned if he doesn’t................

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Growth ball in govt’s court, says RBI

The Reserve Bank of India (RBI) on Monday warned that patchy monsoons can knock up prices and trim farm sector and national income growth, obliquely hinting that the central bank was unlikely to cut interest rates. It complained of a cramped “monetary policy space” on the eve of its quarterly review........

Read - Hindustan Times

Which inflation is RBI targeting?

In the last one and a half months, a fierce debate is raging regarding the validity of RBI monetary policy actions against the backdrop of inflation numbers. RBI has given a new twist to this debate with the Governor recently espousing the need to develop a producer price index (PPI) and reiterating its position that increase in interest rates by RBI alone cannot explain the current investment slowdown. No prizes for guessing that we at Ficci would be on the other side of the debate. However, our endeavour in this piece is not to re-emphasise the relevance of a rate cut, but to open up a new area of debate by focusing on the rationality of the RBI policymaking............

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India's central bank set to hold interest rates steady

......"With upside risks to inflation, we believe that there is limited room for the RBI -- at this juncture -- to support growth through a cut in the repo rate,"......

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Economy is now at a critical juncture: RBI

....Economy is now at a critical juncture,” the RBI said, where revival can be supported by restoring confidence through policy actions to encourage investment. Maintaining that inflation is likely to be sticky during 2012-13, the RBI said, “Inflation and macro-risks will condition growth-enabling policy actions with a view to supporting recovery in a non-inflationary manner.”.......

 

Read - Indian Express

Losing momentum

A day before it makes its next monetary policy move, the Reserve Bank of India (RBI) has reiterated that the Indian economy continues to run into headwinds..........

Read - Mint

Time for surprises is over; Bet on no rate-cut: YES Bank

: So, status quo policy is what you expect. But the RBI has made very clear that it has little room to maneuver. To quote the RBI, “The fiscal and monetary space to stimulate the economy remains limited in the presence of an already large fiscal deficit and persistent inflation.” So, does the battle between the government and the RBI wage on?

A: Unfortunately, yes. This time the RBI has gone a step further and prescribed a revival of growth to the government, reiterating that a lot of confidence-building is to essentially come from government policy actions.....

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RBI Warns of More Inflationary Pressures From Poor Rains

......Noting that the benefits from the declining global commodity prices were partly offset by the falling rupee, it said "the near-term inflation trajectory could remain sticky and conditioned by a number of risks that emanate from the unsatisfactory progress and distribution of the monsoons, higher MSPs announced for kharif crops and the impact of the exchange rate pass-through."  The report warned the path of inflation may also be impacted by the timing and magnitude of administered price revisions even though such adjustments have become necessary to reduce pressure on the medium-term inflation from expansionary fiscal policy........

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It’s up to New Delhi to fix the economy: RBI

Says interest rates can no longer be blamed for slowdown

The Reserve Bank of India (RBI) has painted a sombre picture of the economy because of government inaction on reforms and rising inflation. It has also put the onus of reviving growth on the government. For this, it has said, subsidies and expenditure have to be cut. Interest rates, RBI has said, are no longer the cause of the economy’s slowdown.....................

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Outlook for economy remains weak

....“Decisive policy action backed by credible commitment to a long-term strategy for correcting macroeconomic imbalances and stimulating investment is crucial at this stage to revive confidence as well as provide space for monetary policy to help sustain growth while keeping inflation under control,”.

Read - BS

Status quo hint in RBI text

......In an unequivocal message to Prime Minister Manmohan Singh, who now looks after the finance ministry, the RBI said the fiscal deficit target for 2012-13 was at a risk of being breached because of likely overshooting of subsidies and a shortfall in receipts. The central bank, therefore, asked the Centre to concentrate on setting its fiscal house in order by curtailing subsidies and significantly boosting government capital expenditure to provide an investment stimulus to the economy, which would help crowd-in private investment........

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RBI Must Stand Firm

.....Eventually, India's central bank will have to relent on decade-high interest rates to help boost the economy. The RBI surprised the market three months ago with a half-percentage-point cut. But there can surely be no surprises this time around...... 

Read - WSJ

Inflation a big worry, RBI says on policy eve

...... “The capacity of investment to respond to monetary policy actions to stimulate growth is conditional on an improvement in non-monetary factors that have impacted investment in the current cycle,” .........

Read - BS 

RBI Says India Inflation Risks Significant Even as Growth Slows

.....“The Reserve Bank is facing a dilemma on policy action in the current stagflation-type environment,”..........

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RBI macro survey sees FY13 GDP growth at 6.5%

........"Risks to inflation remain from unsatisfactory monsoon and increases in MSP even as growth slowdown eases demand pressures. While core inflationary pressures are currently muted, a continued rise in real wages may spill over to core inflation." While RBI did not indicate to cut rates amid the ongoing threat of high inflation rate, it fully recognised the threat of waning GDP growth that needs to be revived by lifting the investors' confidence............. 

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Public versus private

....The regulators have also decimated the profitability of various pieces of the financial services industry over the last few years and thus shrunk the profit pool for financial services. First we had Sebi go after the mutual funds and insurance sectors, destroying the manufacturer margins as well as severely denting the economics of third-party distribution. Then gold loans and microfinance came into the regulators’ cross-hairs, and their business models will have to be re-jigged. The whole capital markets piece is bleeding, with no signs of profitability — and the RBI has significantly tightened priority-sector norms, making these targets much harder to achieve without self-origination of assets. Thankfully the RBI seems to have pulled back on the new non-banking financial corporations’ priority sector and securitisation guidelines, or even that sector may have undergone a profit shock.......

Read - BS

Non-bank credit flow doubles

Flow of credit to the commercial sector from sources other than banks doubled in the first quarter of the current financial year, the Reserve Bank of India (RBI) said in the macroeconomic and monetary development report on Monday. While credit growth was in line with projection, it is expected to fall, the central bank said a day ahead of the first quarter monetary policy review. Bank credit grew by 17.4 per cent in mid-July 2012 from 16.8 per cent at end of March 2012. RBI had projected credit growth of 17 per cent for the current financial year. “Hence, credit growth is in line with the indicative trajectory of 17 per cent for the year. Anecdotal evidence from bankers suggests that there may be some deceleration ahead,” the report said..........

Read - BS