Technology in the financial sector - some issues and a few concerns - G Padmanabhan

Address by Mr G Padmanabhan, Executive Director of the Reserve Bank of India, to the 

Bankers’ Club, Thrissur, 22 October 2012

.............The point that I have been trying to make so far is that advancement in information and communication technology has opened vistas in financial sector that could not be imagined a few decades back. Yet, it cannot perhaps be said that all the ways in which we have harnessed the technology has contributed to social utility or made the financial sector more robust and useful.........

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Inflation — visible and invisible - A.Seshan

......The RBI’s focus should continue to be on inflation, though there is considerable pressure on it from the banking and the corporate sectors, and also the Government, to loosen up policy in the interest of growth. Such liberalisation can be in two ways. One is a further reduction in the banks’ cash reserve ratio (CRR) that will release primary liquidity. The other is a decrease in policy (repo and reverse repo) rates by the RBI. Under the current circumstances, the reduction in policy rates is preferable to that in CRR.......

Read - HBL

FINANCIAL LITERACY DRIVE

As part of the drive to initiate financial literacy, RBI in its series of workshops conducted in various schools all across the country, conducted its first workshop in D.A.V East of Loni Road, Delhi on 5^th October 2012 for the students of classes X to XII. The workshop was conducted under the resource persons Mr Anupam Sharma, Assistant Manager RBI and Mr Pal, Assistant Manager RBI........

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A Phoenix Called Microfinance

.........“We kept requesting RBI to regulate us, bring us formally under your ambit, give us recognition, RBI chose to ignore us deliberately as they felt that we were doing a good job despite the regulation, RBI said do not make us regulate you ,you will lose all this leeway.” Unlike most people who felt that RBI was reactive in its approach, I would assume that RBI did have a Plan – B ready, though I must accept that it took a little long to put it in practice…Since then there have been a slew a measures taken by the RBI as part of course correction for the sector.........

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Unfair comparison

This refers to “RBI’s ineffective communication” (Business Line, October 23). Unfortunately, the author has relied on the experience of the US and its Federal Reserve to build his case on the performance of India’s central bank on communication. India cannot be compared with the US at this stage. The two countries differ in historical background, governance, population, literacy; their measures even for estimating hunger vary. The same applies to the central banks too. The Fed and the RBI are not comparable. One is not aware whether there are restrictions on the number of speeches by Fed officials. North Block may not be aware either. If they come to know, RBI officials may have to talk less in public. It is true that the frequency of policy reviews by the RBI needs to be reduced, as it takes some time for follow-up measures to have an effect.

- M.G. Warrier, Mumbai (HBL)

Lack of coordination

..........This also explains why blaming RBI for failing to rein in inflation, despite several rate cuts, is unfair. Instead, but for RBI’s firm determination, inflation would have flared up further. Any insistence on the part of the government to coordinate with RBI to promote growth by liberalising interest rates will be counterproductive, unless the former cooperates to check inflation and takes bold steps to enhance growth by other means.

Read - BS

How viable is a common currency for SAARC nations?

.......Those opposing this move argue that it will result in the loss of sovereign control over monetary and exchange rate policies.These policies would then be formulated by some version of a SAARC central bank which would subsume most of the policy-making prerogatives of the present national central banks. Bluntly put, the RBI (along with the finance ministry) would no longer determine India's monetary and exchange rate policies............

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आरबीआई को अपना रुख बदलना होगा

.......सुब्बा राव की समस्या यह रही है कि उन्होंने अर्थशास्त्र की शिक्षा अमेरिका में ली और उनके करियर का बड़ा हिस्सा अमेरिका और यूरोप में गुजरा। वह भारतीय अर्थव्यवस्था की बारीकियों से कभी परिचित नहीं दिखे और न ही इसे पूरी तरह समझ पाये। दरअसल भारतीय अर्थव्यवस्था की बनावट कुछ ऐसी है कि इसमें बड़े पैमाने पर काला धन लगा हुआ तो है ही, इसमें नकदी की बड़ी भूमिका है। नकदी यानी कैश के जरिये आज भी अरबों रुपये का कारोबार होता है, खासकर अनाज और फल सब्जियों का।..........

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What if Statutory Liquidity Ratio is abolished?

.....While following the debate on CRR abolition, an idea came to ones mind as to what would be the medium- to long-term impact on the banking structure if SLR (Statutory Liquidity Ratio) is abolished........

Read - HBL

Time right to cut REPO rate by 100 basis points and CRR by 75 basis points to revive investments and growth

......“RBI should bring down Repo rate from its current level of 8%, by 50 bps immediately and another 50 bps subsequently during the course of the financial year. Simultaneously, Cash Reserve Ratio (CRR) should also be brought down by 75 bps from its current level of 4.5% by the RBI in the second quarter Monetary Policy due to be announced by this month end. This would not only help revive business sentiment and enable companies to raise capital at affordable cost but would also ensure that liquidity in the economy remains adequate”........

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RBI may take a calculated risk and ease monetary levers

Going into the half yearly review of the monetary policy for the current fiscal year, the Reserve Bank of India (RBI) is faced with a macroeconomic environment characterized by high and rising benchmark wholesale inflation, stabilizing growth momentum with signs that economic activity has bottomed, a stable-yet-weak currency, easing commodity prices and slowing global growth. While this macroeconomic backdrop has largely been in place over recent policy reviews, there is a key difference this time around..........

Read - Mint

Priority’s liquidity, not cuts, says St

Several economists feel rising liquidity adjustment facility (LAF) deficit and tightening credit at banks will likely push the Reserve Bank of India (RBI) to again cut the cash reserve ratio (CRR) at least 25 basis points (bps) to 4.25%, when it reviews its monetary policy on October 30. There are, however, few takers for a rate cut, given the sticky inflation......

Read - DNA

Why a rate cut by the RBI will help in growth revival

On the eve of the mid-year review of monetary and credit policy, the Reserve Bank of India (RBI) once again finds itself in an unenviable situation. Signs of growth weakness are everywhere, but signs of inflation abatement are not as widespread. Hence, it has to tread narrowly in that policy alley, without disturbing optimistic developments on both sides...........

Read - ET

A prescription for fiscal health

............Only if all this is done, the RBI can discharge its role in bank rate adjustments to facilitate growth without inflation.

Read - HBL

The hot money debate

.......There are several complications to this argument, and Reserve Bank of India Governor D Subbarao has made his questions about it apparent in recent communications. RBI has been doubtful about doing anything more with the exchange rate than managing its volatility. There is certainly disagreement on whether it is more effective to stimulate growth through exports or through rate cuts. More importantly, the point is whether a real depreciation in the currency should be used to allow nominal depreciation or to build up foreign exchange reserves. If New Delhi intends to finance the current account deficit through FII funds, then the size of India’s reserves becomes vitally important............

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DGST eyes tax on 1.19 lakh cr worth of foreign remittances

.....The RBI is believed to have given the DGST access to information about foreign remittances for 37 purposes such as communication, construction, insurance, financial, postal, courier, satellite services etc. A comprehensive list has now been shared with the DGST for every transaction in these categories. Every time a foreign remittance is made through a financial channel, banks seek details of the currency, country and purpose and forward it to the RBI......

Read - Indian Express

Fake notes worth `1.75 lakh seized in Dehradun

..........the last major seizure of FICN in the State was made by the Haridwar police from Kankhal area about four years ago and counterfeit currency with face value of more than Rs 80,000 was recovered. Those fake currency notes even had “RBI” and “Bharat” printed on the security thread, the two features which are generally absent in counterfeits. “In that case, however, the fake notes had been printed in Bihar and were to be circulated in Uttarakhand and other parts of the country,”............

Read - The Pioneer

6 co-op banks may be forced shut despite Cong-NCP push

.....“We are in touch with RBI authorities after this letter, and have pointed out that the issue had been flagged at the highest level and the Centre is considering an extension, as well as a package. It’s not the question of just six banks of Maharashtra; there are 20 banks in the country that may be shut down and hence we are hoping for some way out,” said a bureaucrat on condition of anonymity. However, the RBI has already given these banks two extensions, and the Centre has not yet assured any help to the state government.......

Read - Hindustan Times

Bond scheme: Effective way to put gold to productive use

.......The gold collected by the government should be deposited with the RBI in exchange for rupees. RBI should be willing to do this as it does not amount to monetising the government's borrowing. In RBI's balance sheet on the asset side, gold will go up, which will be offset by an increase in rupee liabilities. Thinking of it in another way, this would be akin to RBI purchasing foreign currency and releasing corresponding rupee liquidity in the market. The transaction between the government and RBI can be reversed when the gold bond matures. An important point to take note of is that the gold price and exchange rate risk is borne by the saver............

Read - ET

Vyavasayik Evam Audyogik Sahakari Bank penalized

The Reserve Bank of India has imposed a monetary penalty on the Vyavasayik Evam Audyogik Sahakari Bank Maryadit, Morena (Madhya Pradesh) for violations of banking regulation act. The Bank was penalized for violation of the directives/instructions/guidelines of the Reserve Bank of India on credit exposure ceiling, maximum limit on unsecured advances, Know Your Customer (KYC) / Anti Money Laundering(AML) and submission of compliance to RBI’s inspection report.......

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Bank can freeze account into which it mistakenly credited money: High Court

When a bank inadvertently omits to upload the stop payment instruction issued by its account holder and the cheque is thus credited to the account of the payee despite such instruction, the bank is well within its rights to freeze the account of the payee till he returns the money with interest......

Read - HBL

Banks push credit cards, unsecured loans to outside clients

CAUTIOUS MOVE

Banks had stopped this practice in 2008 after the Lehman Brothers crisis They resumed this about a year ago, with utmost care This is because credit bureaus have developed and became more robust The precautions taken by players would ensure default rates do not go up However, after burning their fingers in 2008, a few players remain cautious

Read - BS