An MRI on health of the economy - S S Tarapore

....Till the late 1980s, the approach was that the RBI should reveal the bare minimum required by law and secrecy was the hallmark. Progressively, a more enlightened approach emerged and the RBI now provides a more meaningful presentation. The RBI Accounts and Balance Sheet provide a Magnetic Resonance Image (MRI) of the health of the economy and is very different from a corporate balance-sheet. When the RBI balance-sheet swells, it invariably portends a difficult situation for the economy. Quite often, an increase in the RBI profits is a cause of concern and the payment of dividend (by way of the surplus transferred to government) is no different from created money.......  

Read - HBL

How RBI steers four horses that pull in different directions

.....In India, the Reserve Bank of India (RBI) has multiple and conflicting objectives to manage. It has to manage inflation, growth, rupee and government of India’s borrowing programme. If RBI tries to lower inflation by raising rates, growth falters. If RBI tries to revive growth by cutting rates, rupee can depreciate. If RBI supports the borrowing programme, inflation can move higher. If RBI raises rates to defend the rupee, growth can suffer. Every action of RBI in managing one objective has some bearing on another objective.......

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RBI should lay down entry norms for new banks, says Rangarajan

....“If the Indian banking system is to remain competitive over time, there should be periodic entry of new banks, a closed system can only become oligopolistic,”.......

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Risks to financial stability have worsened, says RBI

.....“(In India) downside risks to financial stability have worsened due to global and domestic factors… there is increasing evidence of deteriorating asset quality (in the banking system),”......

Read - Mint

CRR: The proxy war between FM and RBI

If the CRR is, god forbid, indeed taken away,

it will be a cardinal sin, the saddest day for the economy

.....Under current rules RBI doesn’t have the power to pay interest on CRR. This power was taken away from the RBI through an amendment to the RBI Act in 2006, an amendment which RBI itself suggested. Old timers say RBI gave up this power, only because as long as it has the option to pay interest, bankers will always lobby for it . In fact, that the CRR is really a battle ground between RBI and finance ministry is best evident from the war between the two institutions when these amendments were passed in 2006.  That Amendment bill brought a bunch of changes. Hitherto the CRR could not be cut below 3 percent, but the law said that RBI may pay interest on CRR above 3 percent, if it wishes. The 2006 amendment removed the 3 percent lower limit. RBI argued CRR could go to zero if the situation warranted, but at all times it won’t pay interest – a clever move that the finance ministry apparently realised only after the amendment was passed......  

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CRR, a tool for rare use: Rangarajan

The country needs to move towards a situation where Cash Reserve Ratio (CRR) level comes down and that it is used as an instrument of “credit control” only in extraordinary conditions, said C. Rangarajan, Chairman, Economic Advisory Council to the Prime Minister, on Thursday. As “Open market operations (OMOs) became increasingly major instrument….The role of CRR, as credit control, will come down,”......

Read - The Hindu

CRR is not beyond debate.....but the last word is RBI’s

Apropos the issue of whether we need the cash reserve ratio (CRR) or not, Deputy Governor K C Chakarbarty needs to rethink his position that regulatory issues need not be subjected to debates. If the Constitution of India can be amended 116 times over 62 years, why can’t we consider changing the regulatory framework?................

......From the Reserve Bank of India’s (RBI’s) perspective, CRR is vital for controlling liquidity in the system. And indeed RBI should have the final say on the issue since CRR is part of the monetary policy, which is the sole preserve of RBI.

Read - BS

Use CRR only as last resort: Rangarajan

Chairman to the Prime Minister's economic council and former RBI Governor, C Rangarajan, said CRR should be used as a tool to control credit only in ‘extraordinary circumstances’ as open market operations become an increasingly major instrument to control liquidity. The argument would be seen as a support for State Bank of India's chairman Pratip Chaudhuri’s call for CRR being abolished for which he was snubbed by KC Chakarbarty, the Deputy Governor of RBI........ 

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Rangarajan says CRR should be reduced

The chairman of Prime Minister’s economic advisory council, C Rangarajan, has added to the debate on banks’ Cash Reserve Ratio (CRR), saying it should be brought down and used only in extraordinary conditions. He said the need for using it reduces with the option of Open Market Operations (OMOs) in place.....

Read - BS

SBI expects 1% reduction in CRR on 17th September

..............Explaining the rationale further, Chaudhuri said the total incremental income to SBI will be only around Rs100 crore in case of a repo cut. "That is why when RBI raised the rates three times, none of the banks moved the rates. So, I will say though repo rates and base rate move in the same direction, the correlation is very weak." The statement comes in the middle of a row he started last week by calling for abolition of the CRR, saying this would release the much needed funds to the system.

Read - Moneylife

‘Stake dilution in public sector banks poses political problem’

....“The other alternative of reducing the share of the government in public sector banks poses difficult political problems,” Dr. Rangarajan said addressing a financial summit here. His comments come within two days of Reserve Bank Governor D. Subbaroa stating that if the government decides to maintain its stake at 57 percent, it will have to pump-in Rs.90,000 crore while if it decides to bring it down to 51 per cent, it would need to infuse Rs.70,000 crore......

Read - The Hindu

RBI advises against gold investment

On a day gold prices touched a new high, the Reserve Bank of India (RBI) urged the public against choosing gold as an asset for savings or investment. "Because interest rates are very low, people are investing in gold. But the poor should never invest in gold for whenever they have purchased gold, it either lands up in the temple or in the hands of the moneylender or, at the most, it may be given away during a daughter's marriage," said K C Chakrabarty, Deputy Governor, RBI....... 

Read - TOI

GMLA not applicable to NBFCs under RBI Act: HC

.....According to section 5(2) of the GMLA all NBFCs registered under RBI Act and operating in Gujarat come under purview of the GMLA They will have to report to the Registrar General of Money Lenders. The Court held that this was in direct interference with the institutions which are registered under the RBI Act. The state law was encroaching upon the RBI Act which is a central act. The section 5(2) of the GMLA is against the Constitution of India as it seek to have control over all NBFCs already registered under the RBI Act. "The GMLA will not be applicable to all NBFCs registered under RBI Act," the court held.......

Read - BS

LIC's 11% SBI stake makes RBI see red

.....The Reserve Bank of India (RBI) has conveyed its discomfort to the bank’s management, according to a top SBI official. “These are two big institutions. RBI is not comfortable with two large institutions having a cosy relationship,” the official said. A top RBI official also confirmed the development. “Any institution that wants to have more than five per cent stake in a bank needs to have our prior approval, even if the stake is acquired from the secondary market,” the RBI official said. “We don’t want the banking sector to have too much capital from volatile sources,” he added.......

Read - BS

'Banks should give replacement before leaving a consortium'

...The panel was also formed to increase the information sharing process within banks in the consortium because the finance ministry is of the view that despite the Reserve Bank of India (RBI)’s repeated requests, there is an asymmetry in information among banks and the companies have been taking advantage of it............

Read - BS

Manage your credit well to curb NPAs: RBI to banks

.............“Overall improvement in the risk management systems, upgrading technological platforms and building up of specialised skills in the banking system are the challenges which will distinguish the more successful ones from the others. It is important that competitive pressures are not allowed to override basic prudence,”............ 

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Sinha backs call for higher NPA provisioning

Reserve Bank of India (RBI) Deputy Governor Anand Sinha has backed the Mahapatra committee’s recommendation of higher provisioning for restructured assets. Banks, however, had opposed the proposal, saying this would lead to a sharp rise in bad assets.........   

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RBI: Do not differentiate between depositors

The Reserve Bank of India (RBI) has told banks not to differentiate between high-value depositors and small depositors. “There can be reasonable difference (in the interest rates), but it shouldn’t be large,” said Deputy Governor K C Chakrabarty...........

Read - BS

RBI Deputy Guv for Less Disparity in Deposit Rates

...."We at RBI would want banks to offer more or less similar rates to all depositors, although a reasonable difference is fine," the senior most Deputy Governor told a gathering at the MR Pai memorial award function (the award was given to women's self-help group Sewa). The late MR Pai was a crusader for the rights of bank depositors.....

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ECB action could help trim CAD: Chakrabarty

...."Yes, the bond-buying programme announced by ECB today could increase the fund flows into our economy. If it happens, which is likely, then it can help bring down our high current account deficit (CAD). From that point, the move is good for us but it also can increase commodity prices," ......

Read - Business Today

Revised guidelines on priority sector lending – rationale and logic - K C Chakrabarty

.......The priority that senior management of banks accord to priority sector would determine the success of our efforts in this area. Without this commitment, it would not be possible to accomplish this task. Let me assure you that the top management at the Reserve Bank is fully committed to this goal, as is evident from the amount of time we spend on this subject at our meetings and outreach visits and the number of enabling policy initiatives that we have taken in this regard. Financial inclusion and priority sector credit are closely interconnected subjects as financial inclusion is the process and priority sector loans are the business effect/ end product of the same in the books of the banks. If we are doing financial inclusion, then these targets are achievable, if not, then these are not. The new guidelines, then, is the new mantra...........

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National Housing Bank to introduce guidelines for non-banking housing finance cos.: Chairman

......``Besides, the lending sector cannot lend beyond a certain point due to capital constraints and with securitisation they would be enabled to continue to lend and can come over all constraints if they are able to securitise,`` said Verma while releasing an ASSOCHAM study titled `Securitisation: The Emerging Funding Vehicle` along with A.K. Choudhary, General Manager, Department of Banking Operations and Development (DBOD), Reserve Bank of India; S.C. Aggarwal, chairman, ASSOCHAM Capital Market Committee........

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PERFORMANCE OF THE INDIAN RUPEE

..........In terms of managing the currency, the Reserve Bank of India (RBI) has been unique in that it has been following a flexible exchange rate policy in the last couple of years (except for the heavy intervention in the three months to January 2012). The current stance is significantly different from the rigid stance of the pre-1991 period. This flexible stance led to a significant ................ 

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India's banks face tough period

I

ndia's struggling banking sector will face a period of lower profitability as it seeks to raise at least Rs 5,00,000 crore (USD 90bn) in extra capital to meet the new Basel III international banking standards, the head of the nation's central bank has warned........... 

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Indian Banks Have Catalyzed Growth: Now They Have to Grow

....."If the economy grows 8%, 9% or 6.5%, the banking sector will grow at at least two-and-a-half times the rate of India’s GDP growth. The sector could grow 16%-to-24% per annum year-on-year for the next decade. That means by 2020, we as a sector can be five times what we are today. So the growth opportunity is huge.".........

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1/3rd of new ATMs should be visually-challenged friendly: RBI

...."It has been brought to our notice...that visually challenged persons are facing problems in availing banking facilities like internet banking... Banks are, therefore, advised to strictly adhere to instructions... and extend all banking facilities to persons with blindness, low-vision and other disabilities.," ......

Read - Hindustan Times

Fraudulent debit card transactions on the rise in AP

Fraudulent Internet debit card transactions are on the rise in the state and form the second highest among the complaints being received by the Banking Ombudsman after the disputed ATM transactions. In this case, the additional security feature — an instant password sent to customer’s mobile phone at the time of every transaction — provided by the banks to check such instances has also become the target of the fraudsters, according to M Sebastian, Banking Ombudsman of Andhra Pradesh...........

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Also read..........

Credit card usage 30 times that of debit card payments annually: RBI

Indians use a credit card for an average payment amount of about Rs 55,000 in a year — which is nearly 30 times the money spent through debit cards. However, the number of debit cards in the country is more than 15 times than that of credit cards, shows an analysis of data available with Reserve Bank of India............

Read - HBL

No debit cards please, we're Indians

Indians use a credit card for an average payment amount of about Rs.55,000 in a year — which is nearly 30 times the money spent through debit cards. However, the number of debit cards in the country is more than 15 times than that of credit cards, shows an analysis of data available with Reserve Bank of India........ 

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Swiping with value additions

ON THE CARDS

Visa offering packaged security solutions to banks for cards issued on their platform   National Payments Corporation of India lowers charges to make inroads in the market share of international payment gateways   Against established international players like Visa and Mastercard, NPCI has two strengths to play at — cost effectiveness and rural reach   NPCI offers services at flat 40% discount   NPCI, promoted by banks, also plans to launch an international debit card on similar terms in June 2013

Read - BS

How to beat a cheque-stealer

How can you beat the crook who stole your cheque from the bank’s drop box? Easy. Write down the account number of the person after his name in the column ‘Pay’ on the cheque leaf. The Banking Ombudsman (Delhi, J&K and some parts of UP and Haryana), M. Rajeshwar Rao, toldBusiness Line: “People, while depositing, do write the name, account number and phone number on the reverse of the cheque. However, when the cheque is sent for clearance, normally the front portion is photocopied or scanned and sent. If details are ok and there is no alteration, the cheque is cleared.....

Read - HBL