Can RBI, finmin turn a new leaf ?

“the appearance of autonomy is as important as the actual autonomy itself” and “the very existence of a joint committee will sow seeds of doubt in public mind about the independence of regulators”

.....RBI is answerable to Parliament and, hence, no governor can afford not to consult the finance minister on critical policy decisions. Besides, the government also employs another way of controlling the central bank—the Trojan horse strategy. It’s no coincidence that a majority of RBI governors have been former finance secretaries, including Subbarao. The five-year term of Subbarao’s predecessor Y.V. Reddy that ended in September 2008 is particularly well known for what Reddy himself dubbed as “creative tension”. Reddy’s book, India and the Global Financial Crisis: Managing Money and Finance, a compilation of 23 speeches delivered at various forums in India and abroad offers glimpses of the serious differences between the finance ministry and the central bank on many critical issues........

Read - Mint

India leads the world in inflation - S.S.Tarapore

......But at the present time there is considerable pressure on the RBI to undertake monetary easing. Given the unacceptably high inflation rate, monetary easing would be hazardous. Hence, the RBI deserves full support in its cautious approach to monetary easing. While the fisc is weak and cannot afford to undertake further easing, pressures would mount to ease monetary policy. In other words, monetary policy will be the sacrificial lamb to appease the powerful lobbies. There are overt pressures from the government to goad the RBI to reduce interest rates. What is of concern that policymakers and opinion makers genuinely feel that all that it takes to stimulate growth is lowering of interest rates. Thus, sooner or later RBI will be forced to reduce interest rates......

Read - FPJ

No policy paralysis, but complexities remain: Y V Reddy

.....I would not agree that there is policy paralysis. There are policy difficulties and the initiative would depend on political and economic considerations. We should also be realistic that how much our social context, political context permits us to do,” Reddy said while delivering the 17th Prem Bhatia Memorial Lecture.............

Read - Indian Express

Right guy at the wrong time ?

.....A government official involved in taking decisions at the highest level, who spoke on condition of anonymity, conjectured that Rajan is being brought in to ultimately head the Reserve Bank of India. The current governor of the central bank, D. Subbarao, who was handed a second term at office, will retire in September next year. “Some may argue Rajan does not have enough administrative experience to be the governor of RBI,” the official said. “But then Ben Bernanke (chairman of the US Fed) also did not have any.” That assurance may have convinced Rajan to join the government.

Read - Mint

Students from UK institute get a taste of RBI functioning

Emma Nowak, pursuing her second year economics degree at the Newcastle University Business School, was always keen to experience and learn more about the procedures carried out at a central bank first-hand. Through her institute, not only was she able to do this but was also able to learn about the central bank and financial policies from the experts. And, all this was done at the Reserve Bank of India (RBI) in Pune. Students of the Newcastle University Business School are on summer internship opportunity, as a part of their global exposure. Six undergraduate students from the institute were a part of a programme to intern with RBI in Pune for six weeks. "Today, employers are less than enamoured with such international study ‘tours’, and expect to see international experience programmes founded on good pedagogical foundations. The Reserve Bank of India Summer internship programme is, therefore, such a wonderful opportunity, something we would like to replicate with other companies across the world," ...................

Read more - BS

Finance ministry wants RBI to pay 7% interest on CRR deposits

The finance ministry has suggested that the Reserve Bank of India pay 7% interest on the mandatory deposits parked with it by banks, one among several measures proposed to lower rates even if the central bank does not ease the monetary policy..........

Read - ET

Still southward bound

....Incidentally, a look at rupee debt suggests an interesting possibility. FIIs bought Rs 46,000 crore of rupee debt in the past 12 month and domestic institutions bought an unbelievable Rs 3.8 lakh crore of debt. This is a pointer to the size of the borrowing programme. But it also boils down to a massive bet on rates falling soon. There would be staggering capital gains available on the debt segment as and when, RBI does cut. It may be worth taking modest exposures in medium-term debt funds. This looks to be low risk since RBI is unlikely to hike......

Read - BS

Car seva

D K Mehrotra, who is three or four months into his job as chairman of LIC, the country’s largest insurer, was so solicitous of the comfort of financial services secretary D K Mittal that he managed to create a traffic jam in Mumbai. Both were at the Reserve Bank of India (RBI), Mittal for the central board meeting, and Mehrotra for the customary lunch RBI hosts afterwards. Later, when they were waiting for their cars outside the central bank headquarters, Mehrotra’s was the first to drive up. He then offered Mittal his car but the financial services secretary chose to wait for his car instead. But Mehrotra continued to press his offer, apparently oblivious of the long line of cars forming behind his. Eventually, he reluctantly got into his car after Mittal literally forced him in. Even then, he asked his driver to pull up a little ahead and wait till the car assigned to Mittal, who has been in the news recently for sending public sector banks detailed suggestions on their functioning, arrived.

BS

Micro-managing banks

.......The person, at the centre of the news, D. K. Mittal, the financial services secretary, is, however, unfazed by the criticism. According to him, the intention is to jolt state-owned banks out of their “lazy banking habits and force them to lend more to small-scale and agriculture”. Those are words reminiscent of a bygone era. Rarely does one hear such statements, at least in public in the reform era.........

Read - The Hindu

Undermining RBI

Any domination or interference of the Central government in the functioning of the central bank of the country (‘Govt should not undermine RBI’, Business Line, August 11) may not be in the interests of the economy as a whole. If legislations such as Fiscal Responsibility and Budget Management Act and relevant provisions in our Constitution are adhered to by the Government, no friction can arise.

- K. Gopalan Bangalore (HBL)

Are you being shortchanged?

.......Besides, no less than 13 coin-vending machines have been installed in RBI Kolkata, where all one has to do is insert the currency notes to get the coins of the same value. These vending machines are dispensing no less than Rs 5 lakh in coins every day. RBI is even bearing 50% of the cost banks will incur if they install these machines in urban areas and a whopping 75% in rural areas. Around 70 coin-vending machines have already been installed by various banks in Kolkata and suburbs. And yet, when it comes to giving you the change, there seems to be a perennial crisis. Strangely enough, there is a mad scramble in front of RBI's Kolkata office coin exchange counters every day. But who are these people who are exchanging bank notes for coins? It's impossible to keep a record of that, says the RBI. But ironically, these very coins are then 'sold' for a price right outside the RBI building. It's another matter that 'selling' coins is illegal; these can only be exchanged......

Read - TOI

Kerala chamber to provide coins of various denominations

...... 'Coin disrtibution system initiated by KCCI with the aid of RBI is to minimise in particular the difficulties faced by the trading and business community due to the accute shortage of coins in the State,' .........

Read.........

Poor will now get ATM cards

......What the new norms mean is that no customer who comes to open an account can be turned away even if he cannot maintain minimum balance" said KC Chakrabarty, Deputy Governor, Reserve Bank of India. The new directive comes after banks failed to make any major headway in `no-frills' accounts. Also a major disadvantage of the no-frills account was that without a cheque book or ATM facility the ability to conduct transactions was limited............ 

Read - TOI

Govt to PSU banks: Ensure one a/ c per family

....For financial inclusion of the excluded and to facilitate the electronic benefit transfer that banks were advised to ensure opening of one bank account per family......

Read - FPJ

Federal Bank's new Corporate Banking branch

H.R.Khan, Deputy Governor, RBI and Shyam Srinivasan, MD & CEO, Federal Bank at the opening of the Bank’s new Corporate Banking branch at Nariman Point, Mumbai on Friday

Heads of smaller PSBs may get to lead bigger lenders

The change of guard at the finance ministry has triggered fresh speculation about the appointment of chairmen of state-run banks. Chiefs of three PSU banks — Alok K Misra (Bank of India), S Raman (Canara Bank) and M D Mallya (Bank of Baroda) — will retire this year. Historically, the government nominates chairmen from smaller PSU banks as the chiefs of large state-run lenders. Under Pranab Mukherjee’s regime, it was proposed that executive directors of large banks be appointed as chairmen and the names of S S Mundhra, ED at Union Bank; and V R Iyer and R K Dubey, both EDs at Central Bank of India, were shortlisted. But with P Chidambaram back in North Block, there is a feeling that the old practice of lateral recruitment will continue. If so, Arun Kaul (UCO Bank), T M Bhasin (Indian Bank) and M Narendra (Indian Overseas Bank) will benefit because of their seniority.

TOI

Farmers may get short time to repay loan

A disappointing news for the farmers from the bankers: They may now get a shorter duration to pay back loans availed through Kisan Credit Card (KCC). As Reserve Bank of India (RBI) has made changes in the KCC scheme, it has done away with the provision of having a 12-month repayment period. Instead banks will have the discretion to fix a repayment schedule depending upon the harvest cycle of the crop for which loan has been granted...........

Read - TOI

The big problem of agricultural loans

The Reserve Bank of India (RBI) has put the biggest four foreign banks on a sticky wicket with a new policy— foreign banks with 20 branches or more face the same Priority Sector Lending (PSL) requirements as domestic banks...........

.....The shortfall must go in what bankers refer to as “penalty deposits” at the National Bank for Agriculture and Rural Development (NABARD), earning between 7.5% and 2.5% depending on how badly the bank missed the target. Why do so many banks resort to penalty deposits rather than lend more to agriculture? This is because additional viable borrowers in agriculture have been very hard to find.......

Read - Mint

Banks biased against SMEs, agri sector in debt recast: RBI

........“Public sector banks have more retail, agriculture and SME book but it’s not reflected in the restructured book, while private sector banks have more corporate book, but the restructuring quantum is very less,”............

Read - BS

Govt carrying misconception on gold NBFCs: AGLOC

......Association of Gold Loan Companies (AGLOC), not comfortable with the measures undertaken by the Reserve Bank of India, has said government has a lot of misconception about the industry.......

Read......

Gold import caused high current a/c deficit last year: Rangarajan

India's huge gold imports in the last financial year at $60 billion was partially responsible to high current account deficit, Prime Minister's Economic Advisory Council Chairman C Rangarajan has said........

Read - BS

As defaults mount, banks seek easier NPA norms

Saddled by growing stock of stressed loans, banks have asked the Reserve Bank of India (RBI) to soften its stand on the restructuring of bad assets while issuing its final guidelines. In a feedback to the regulator on the recommendations of the Mahapatra committee, which has suggested stiffer rules to deal with restructuring of non-performing assets (NPAs), banks have requested that accounts that have been restructured once should be considered as standard...........

Read..........

RBI to simplify rating parameter for UCBs: Karupusamy

Reserve Bank of India (RBI) is proposing to simplify rating parameter for Urban Cooperative Banks, RBI Executive Director S Karuppasamy said today. 'However, it will not be made public' he said while speaking after inaugurating a Seminar on 'New Supervisory Action Framework & CAMELS for UCB's' organised jointly by RBI, National Federation of Urban Cooperative Banks and Credit Societies Ltd.,, New Delhi and Karnataka State Cooperative Urban Banks Federation Ltd..........

Read.........

Cooperative banks tread where commercial banks fear

Cooperative banks are mostly the whipping horses for Nabard and RBI. But what they do not seem to take into account is the unviable propositions these banks are subjected to. A case in point is Karnataka...... 

Read...........

RBI dy guv finds CDR favouring public-sector banks

.........."Restructuring has not been done in an objective manner. It is heavily biased in favour of public sector banks. It has substantial bias towards more privileged borrowers vis a vis small borrowers," Chakrabarty said in a speech at a conference on corporate debt restructuring. Chakrabarty also expressed concern that banks would push companies to restructure their debt in order to avoid defaults that would show up as non-performing assets (NPAs) in their books............

Read.......

Don't stunt real estate growth: DLF Chairman KP Singh to RBI

Realty giant DLF's Chairman K P Singh has said that RBI's monetary policy should not stunt the growth of real estate sector and uninterrupted access to affordable finance is vital for this business.........

Read - ET

99% households feel prices will rise, says RBI survey

Mumbai, Aug. 12: Ninety nine per cent of Indian households believe that general prices will rise in the next three months and also the full year, according to a Reserve Bank of India survey. The three months ahead and one-year ahead inflation expectations are up 30 basis points at 12 per cent and 12.8 per cent, respectively, RBI data showed. Respondents of the 28th round of inflation survey believe that prices will be on the uptrend, mainly influenced by movement in food prices. The survey was conducted simultaneously in 12 cities and covered 4,000 urban households.

HBL

RBI rejects debt SOS from textile companies

........Industry experts believe the RBI rejected the plan because it involved mostly small borrowers who do not have the resources to petition their cause like corporate giants. “Had it been a Kingfisher, the RBI would have considered it,” said S Dhananjayan, a chartered accountant from Tirupur in Tamil Nadu. The town is known as the textile hub of the south............

Read - DNA

Have you ever seen a defaulter take public transport: RBI asks banks

....."Have you ever come across the promoter of a company that has come for restructuring take public transport?" KC Chakrabarty, Deputy Governor, Reserve Bank of India questioned bankers at a seminar on corporate debt restructuring organized by the Centrum group.........

Read - TOI

Banks biased towards large cos: Chakrabarty

 “Maybe restructuring is not objective and the process is not transparent,”

Read more..........

When some debts are more equal

........Restructuring has not been done in an objective manner. It is heavily biased in favour of public sector banks, towards more privileged borrowers vis-a-vis small borrowers," Chakrabarty said. Chakrabarty expressed concern that banks would push companies into restructuring debt in order to avoid defaults that would show up as non-performing assets (NPAs) on their books. “Why should only public sector banks come before the CDR cell?” he asked remarking that this is because the process is not followed in an objective manner.............

Read - Deccan Herald

India’s industrial slump

.... Finally, the RBI seems to have veered towards limiting liquidity in the system, as part of its anti-inflationary thrust, reducing access to credit for at least some borrowers who had been earlier considered eligible......

Read - The Hindu

India to seek HSBC, StanChart details from FSA

The Reserve Bank of India (RBI) and other Indian agencies are seeking details from British financial regulator Financial Services Authority (FSA) about two UK-based global banking giants - HSBC and Standard Chartered...........

Read - Deccan Herald