Yes and No, Mr Finance Minister

Differences between the government and the RBI are inevitable as they work on different time frame

.......For a minister who is anxious to see results and is eager to force the pace, it might be annoying to find the RBI march at a different pace. But it is inadvisable to ignore the inexorable logic of why countries the world over have institutionalised the present system of checks and balances; one that gives central banks the liberty of striking a different pace from that of their elected governments, albeit within a common overall framework. Dissent is the essence of a democracy, whether between individuals or between a government and the central bank........

Read - ET

RBI may ask banks to improve monetary transmission

The Reserve Bank of India (RBI) might ask banks to improve monetary transmission by cutting lending rates in response to the reduction in cash reserve ratio (CRR) it had announced in September. It had cut CRR by 25 basis points to 4.5 per cent of banks Net Demand and Time Liabilities. CRR is the proportion of total deposits a bank has to keep with RBI as cash.......

Read - BS

What to do if a fake note pops out of an ATM?

.......Asked to comment what a person was supposed to do in case he drew a counterfeit note from an ATM, Banking Ombudsman M. Sebastian told The Hindu that “such things should not happen.” The customer, he said, should lodge a police complaint, take up the issue with the bank concerned, and write a letter to the Issue Department of the RBI for appropriate action. “We do have checks and controls and validation system to be followed by all the banks before loading cash into ATMs,” he clarified........

Read -The Hindu

Inter-school quiz

VISAKHAPATNAM : Students of Sri Prakash P. Krishna Pradeep and P.V.S. Vamsi Krishna of 10th standard bagged first place in the district- level RBI inter-school quiz competition held at Timpany School here on Monday. The winners will be eligible to participate in the state-level competitions. RBI regional coordinator A.Samba Sivarao and GITAM University vice-chancellor G. Subrahmanyam presented a cash prize of Rs.1000 to the winners.

The Hindu

Dear FM, please leave the RBI alone

.......The government should leave the RBI alone if it wants to achieve its objectives of lower interest rates. A government doing its job of managing the economy efficiently is enough for the RBI to act on its own.

Read - Firstpost

‘Bring all regulators other than RBI under one agency’

.......The changes “would yield benefits in terms of economies of scope and scale in the financial system; reduce the identification of the regulatory agency with one sector; help address the difficulties of finding the appropriate talent in government agencies”. For RBI it has suggested hiving off the roles of debt management and running of the bond and currency markets too. The debt management function would be run by a separate organisation while the market regulations would be housed in the over arching regulator. A senior official connected with one of the regulator said the proposal was possible to implement but could face political opposition.......

Read - Indian Express

Srikrishna panel for unified financial regulator

PANEL'S PROPOSALS

A unified financial regulatory agency to subsume Sebi, Irda, PFRDA and FMC A central bank in charge only of monetary policy, consumer protection law and micro-prudential law in banking and payments Securities Appellate Tribunal be merged with Financial Sector Appellate Tribunal to hear appeals against RBI Resolution Corporation watch financial firms that have made intense promises to households and intervene when the net worth of a firm is near zero Financial Redressal Agency address consumer complaints against companies across the financial sector Independent Debt Management Office and the Financial Stability Development Council

Read - BS

RBI rationalises categories of pre-paid payment cards

The Reserve Bank of India (RBI) today rationalised the categories and value limit of pre-paid payment cards to three broad categories from five earlier. The pre-paid cards, technically known as semi-closed pre-paid instruments (PPI) are convenient alternatives to cash and cheques. These are mainly issued by banks and Non-Banking Financial Companies (NBFCs) on payment of specified amount and are used for purchasing goods and services from limited outlets........

Read - HBL

Bernanke to meet RBI top brass on 10 October

Mumbai: Ben Bernanke will meet the top brass of the Reserve Bank of India (RBI) at the Indian central bank’s headquarters in Mumbai on 10 October, in the first visit of its kind by a chairman of the US Federal Reserve. Bernanke met RBI governor D. Subbarao last year in Washington as part of the second annual meeting of the US-India Economic and Financial Partnership. The third annual meet of the body will be held between 9 and 10 October in India. Bernanke will be part of the US delegation, headed by US treasury secretary Timothy Geithner who is also expected to meet senior RBI officials........

Read - Mint

October hope for new banking licences

.......RBI wants the Banking Laws (Amendment) Bill to be first cleared by Parliament and then initiate the process of providing new licences. But many in the government, including chairman of the Prime Minister’s Economic Advisory Council C Rangarajan, are of the view that new licences can be issued according to current banking regulations and the law could be modified in due course. In the changed circumstances — with finance minister P Chidambaram at the helm of affairs and government’s resolve to push economic reforms — the chances of the idea moving ahead has increased, officials pointed out. They said that the differences between RBI and the Competition Commission of India (CCI) over powers to review mergers and acquisitions will also have to be resolved if the government decides to go ahead and take Parliament’s nod to the Banking Laws (Amendment) Bill in the winter session even though it is difficult to pass any Bill in the current political situation........

Read - BS

RBI is wrong, our banks are efficient

Recently, the RBI Deputy Governor K. C. Chakraborty lamented that banks were not passing on the benefit of lowered policy rates to customers. He attributed this to the operational inefficiency of banks in general, and called upon banks to improve their performance. It’s worth looking at whether Indian banks are indeed inefficient. Operational efficiency can be seen in various ways. For a customer, it would mean prompt and hassle-free services at minimum cost, and quick redressal of grievances. For a borrower, lower turnaround time, cheaper interest rates and swiftness in extending non-fund-based facilities would matter. For the regulator, the interest margin that banks enjoy is an indicator of operating efficiency. The issue of operational efficiency can be examined from each of these perspectives — but what is RBI’s stand on banks’ performance?.......

Read - HBL

Non-banking finance companies' gold loan business loses shine over tough norms

NEW DELHI: After registering rapid growth for the past few years, the gold loan business has taken a hit in the first two quarters of this financial year, owing to the tightening of norms by RBI. Non-banking finance companies (NBFCs) offering gold loans say growth has declined despite increased prices of gold offering better leverage (more loans) to the consumer........

Read - TOI

Insurance rejig to give tax breaks, easier policy terms

.......To address complaints of mis-selling by banks, the government is also prodding Irda to agree on a new mechanism. If the move goes through, banks will turn into brokers for several insurance companies instead of being an agent for one life and one general insurance company. In several cases, where banks have also set up insurance companies, a common complaint is that the branches hawk the in-house insurers' policies. Even if Irda has come on board the government also needs to get RBI, the banking regulator, to the changes, something that it was reluctant to do earlier........

Read - TOI

RBI Adviser: Government Needs to do More Before Bank Cuts Rates

.......The RBI, however, refused to lower its key rate for the third consecutive policy review in September due to fears that inflation, which accelerated to 7.55% from a year earlier in August, could worsen if rates were lowered prematurely. "Just because diesel prices were raised, it cannot be reasonably expected that the RBI would immediately cut interest rates," said Indira Rajaraman, a member of the central bank's technical advisory committee. "The RBI has to be convinced" about the effectiveness of the government's steps for a rate cut, she said in a recent interview. "These (steps) have to be followed up by other steps which take on board the need for fiscal rectitude.".......

Read -WSJ

Bankers doubtful on rate cut by the central bank

New York : Speaking on the sidelines of the annual India Investment Forum here, RBI Deputy Governor Subir Gokarn said the central bank would spend two to three weeks before the policy review in taking stock of developments since the previous meeting. Referring to recent measures announced by the government, including a reduction in fuel subsidies, he said, “Clearly, this time we have these added elements, specific actions taken by the government which will directly address risks that we’ve been pointing out on fiscal situation, balance of payments and so on. Eventually, they all have to be evaluated on their overall impact on the growth-inflation balance.”.......

Read - BS

Second phase of RRB consolidation begins

The second phase of amalgamation of regional rural banks (RRB) is expecting to begin this month, with at least ten state level regional rural banks likely to be formed by December this year. In November 2011, the government had said that geographically contiguous RRBs within a state could be amalgamated to form a single state level RRB. The amalgamation will create large state level RRBs, which would help optimize resources, achieve economies of scale and common technology platform........

Read - BS

Employee productivity: Only 9 out of 26 PSBs pass muster

.......In a speech in August 2011, RBI Governor D Subbarao had emphasised that more effective and enlightened corporate governance of banks can be a vital avenue for improving banking productivity. The RBI, in its latest report on profile of Indian banks, has observed that employee productivity in terms of both business per employee and profit per employee in all scheduled commercial banks, including PSBs, private sector banks and foreign banks, at the aggregate level increased continuously in all the financial years during the period 2007-08 to 2011-12.

Read - HBL

Goverment to soon finalise norms for Infrastructure Debt Fund

.......According to sources the IDF would be based on a tripartite agreement between developer, lender (bank) and the IDF. The loans by the banks would be refinanced by the IDF so that banks have free funds for more lending. An IDF may be set up either as a trust or company... A trust based IDF (Mutual Fund) would be regulated by Sebi, while an IDF set up as a company (NBFC) would be regulated by the RBI. The fund would try to garner resources from domestic and off-shore institutional investors, especially insurance and pension funds. Banks and financial institutions would be allowed to sponsor IDFs........

Read - ET

No breather yet for ailing cooperative banks

.......As a bail-out measure for the banks which could not meet the deadline, Chief Minister Prithviraj Chavan and union minister Sharad Pawar had last week sought extension of the RBI deadline by another six months. On Monday, a day after the original deadline expired, senior officials from the state cooperation department said that the RBI was yet to respond to the request. If RBI rejects the request than the banks could face action include dissolution of their management boards........

Read - TOI

Why should bank depositors get a raw deal from banks?

.......The banks woo the depositors till they secure their account, and thereafter they are left high and dry unless otherwise directed by the regulator. It is high time, therefore, the RBI should ensure that the bank depositors are treated fairly, squarely and equitably in the interest of not only continued flow of savings into the banking sector, but also to give the depositors the due reward they deserve for their contribution to the economy of our country. 

Read - Moneylife

Accused continue kho-kho at hearing in Sunil Kedar case

.......It is because of the loss in this fraud that NDCCB is now facing a threat of losing its banking licence. The bank was supposed to have improved its finances by September 31, or else the Reserve Bank of India (RBI) can cancel its licence. Even as there are other banks in the list, NDCCB's losses are because of the fraud and not bad lending. The bank had planned to raise funds by selling off a building to meet RBI norms, but could not find suitable buyers.

Read - TOI

NPA levels in 2011-12 highest in 5 yrs: RBI

NPA OF VARIOUS BANKS Net NPA ratio in %
Bank group	‘07-08	‘08-09	‘09-10	‘10-11	‘11-12
All scheduled commercial banks	1.00	1.05	1.12	0.97	1.28
Public sector banks (Including SBI group)	0.99	0.94	1.10	1.09	1.53
SBI and its associates	1.43	1.47	1.50	1.49	1.76
Private banks	1.09	1.29	1.03	0.56	0.46
Foreign banks	0.77	1.81	1.82	0.67	0.61
Source: RBI
Highlights:
Net NPA levels highest in last 5 years SBI group has 21.77 % of total deposits SBI group has 22.7% of total advances SBI group’s net NPA ratio is 1.76% compared with 1.28% of total banking system Bank offices increased by 5,664 in 2011-12 24.07% interest income growth compared with 15.31% advance growth 12.98 % deposit growth compared with 30.56 % growth in interest expended Cost of funds after declining for two years have risen substantially by 115 basis points in 2011-12

Read - BS