Rakesh Mohan takes charge as IMF executive director

Former Reserve Bank of India (RBI) Deputy Governor Rakesh Mohan took charge as executive director at the International Monetary Fund (IMF) on 1 November. Mohan, who succeeds Arvind Virmani, will represent Bangladesh, Bhutan and Sri Lanka at the IMF, apart from India. After retiring from RBI, Mohan was teaching at the Yale University and Stanford University.......

Read - Mint

Man who said no

.....Subba Rao’s stand on interest rates has brought to focus the larger question of giving RBI greater autonomy. The old boys’ club that includes C Rangarajan, a former RBI governor, has endorsed the line taken by Subba Rao. The latest instance of Subba Rao taking a stand different from the minister’s reinforces the RBI chief’s image as a no-nonsense man which he acquired earlier during stints in the prime minister’s economic advisory council, as a middle-order bureaucrat in the economic affairs department and as finance secretary in his home state, Andhra Pradesh, where he is credited with pulling out the state government from an acute debt crisis.......

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Gokarn may not get extension as RBI Deputy Governor

.....“The Government has constituted a search panel. Technically speaking, Gokarn’s name can also be considered by the panel,” the source said. Gokarn, who turned 53 last month, took over as the Deputy Governor on November 24, 2009. However, a senior Government official said that normally formation of search panel implies selection of new person. “When the present one has to be given extension or reappointment, where is the need for a panel?” he asked. This can be done just by an administrative order, he informed. This whole episode is taking place at a time when strong differences between the Finance Ministry and the RBI have emerged over rate cuts.........

Read - HBL

The Monetary Policy Dilemma

........Governor Subbarao has earned the ire of the FM but won the blessings of the multitude of depositors. Governor Subbarao can take solace in the words of Tony Blair, the former UK Prime Minister who said " The art of leadership is saying no, not saying yes. It is so easy to say yes"

Read - FPJ

RBI mulls to bring co-op banks under Banking Ombudsman Scheme

The Reserve Bank of India (RBI) is at present examining the possibility of bringing co-op banks under the Banking Ombudsman Scheme (BOS), an RTI query has revealed.........

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In an uncertain situation, giving guidance is challenging, but all the more necessary: Subbarao

.....First of all, I want to say that all the criticism that we face is legitimate criticism, it is par for the course. Criticism is value adding, so I have sympathy for it. But there are different points of view. Also it is not correct to say that inflation has not come under control. It has not come down as much as we want, but certainly it has come down from the high of 10.9 per cent in 2010 to 7.5 per cent, averaging over the last several months. We believe that w
e can bring it down further and we need to bring it down - this is a poor country and inflation is a regressive tax on the poor........

Read - Business Today

Finance ministry decides to scan RBI's balance sheet

........A government official downplayed it as a routine review of the reporting structure and disclosure requirements of the RBI, but it comes at a time when there is already obvious tension between the finance ministry and the central bank over the conduct of monetary policy. "It is the government which tables the annual report of RBI in Parliament, so there is nothing wrong if it (government) wants to know how RBI prepares its balance sheet. We are not questioning them or raising objections," a ministry official said. However, another finance ministry official admitted that the review started after the RBI had indicated that it would run into losses if asked to pay interest on mandatory percentage of deposits banks have to park with the central bank, called the cash reserve ratio (CRR). The RBI had stopped paying interest on such mandatory reserves since 2007........

Read - ET

Obituary

We are very sad to inform that SRI. CHANDRAMOWLEESWARAN (Aged 68 years) Retd. General Manager, RBI, Chennai passed away on 1st November 2012. Sri Chandramowleeswaran along with his wife went to Puttaparthy for rendering seva. Affected by lung congestion he was admitted in the hospital there for treatment. The body is likely to be brought to Chennai tomorrow morning. We will inform the further details of the funeral timings etc. once decided by the family. We pray for his soul to be rest in peace and 

convey our deep sympathies and heartfelt condolences to the bereaved family.

As reported by Chandraiah B (via e-mail)

Ghastly car accident

I am sorry to inform you that our good friend Shri.S.K.Thipse, Ex-Manager and his wife (residing in Snehadhara, Vile Parle) were involved in a ghastly car accident on tuesday morning. Thipse, his wife another RBI colleague and one more person were travelling by car to Mahableshwar. As they reached Wai there was a head-on collision and all four were injured seriously. They were promptly hospitalised there. Yesterday all were brought to Nanavati Hospital in Santacruz -- by Thipse's son and Parab's son.  Thipse has an injury in the neck. Smt Thipse has a hip fracture. All four are in ICU.

Please pray for their speedy recovery.

- P.P.Ramachandran (via e-mail)

Govt benefits most from CRR cut

......Apart from the cut in CRR and SLR, RBI has also infused Rs.82,000 crore into the system by buying bonds from the market through its so-called open market operation (OMO). As a result of all these, the government so far has been able to borrow Rs.3.96 trillion rather smoothly out of its annual gross borrowing programme of Rs.5.69 trillion in fiscal 2013, the highest in history. Net of old bond redemptions, the government has borrowed Rs.3.1 trillion. It has also borrowed Rs.3.6 trillion through short-term treasury bills. Such bills are continuously being redeemed and hence the net treasury bill issuance by RBI at this point has been only Rs.28,700 crore. It’s a small amount, but typically the government’s net borrowing through treasury bills is even less than this...........

Read - Mint

'Government to take a view on bank holding co structure after RBI comments'

The Finance Ministry will take a final view on the structure of proposed holding company for public sector banks only after receiving RBI's comments which are expected by November 10, officials said. "RBI has some concerns. They are examining it. Once we get the comments of RBI, then a final decision will be taken," official sources said. "RBI's comments should come by the 10th (of November), let's see. Once RBI clears it, it should not take much time," sources said. ......

Read - ET

RBI deserves Minister’s kudos, not disapproval

.....If the Government’s displeasure is related to the RBI increasing the provisions for restructured standard accounts by 75 basis points, it should understand that genuine financial stability concerns prompted such a move. It should respect the RBI’s judgment on this issue.........

Read - HBL

RBI—the Lone Ranger syndrome

......Now, from the near-plausible to the ridiculous explanation for RBI staying pat at 8%. I must confess that I hadn’t heard this line of reasoning in at least the last few decades. I apologise for my deficiency. But the ancient regime, and equally Lone Rangerish, argument for high if not higher repo rates is that such rates affect real deposit rates, which affect the rates of household savings. Now, there are precious few, if any, empirical studies worldwide showing any relationship between savings rates and real deposit rates. But there are several studies.......

Read - FE

RBI’s emphasis on inflation control cannot be faulted - T.V.Gopalakrishnan

....The objectives of the monetary policy have always been and continue to be economic growth and price stability, and the Finance Minister cannot forget the fact that RBI has been doing its best to enhance credit to the agriculture, manufacturing and retail segments.........

Read - HBL

Growth-inflation dynamics: RBI leans towards inflation control again

.....So when a disappointed Chidambaram said (after the RBI policy announcement) that he was prepared to walk alone, if need be, to revive the challenges of growth, everyone took notice. For any signs of disagreement between the Government and the RBI on any policy action is not a happy situation. It is the surest recipe for disaster......

Read - HBL

Interest rate tussle good for everybody

.....the RBI has shown that the role of the central bank is not to be a pro-active player in the economy but a more conservative one of calibrating money flow in the economy and protecting it from going into a spiral of inflation. This defines the RBI’s role as that of a benign and independent gatekeeper. There was a time when the RBI was the handmaiden of the finance ministry; it responded to the expenditure of the central and state governments and printed the money the government needed. Of course, that did not solve the government’s problems. When money is printed to suit one’s needs, it loses its value. With the onset of economic reforms, it became necessary that the RBI was not seen as the government’s bank, and that it would ensure a level playing field for all money changers.........

Read - DNA

Facing up to fiscal karma

.....Ignore what RBI wants for the moment. Instead the focus should be on the problem at hand. There is no quick-fix solution (as some commentators seem to suggest) to the problem......

Read - Mint

Growth, a common concern

.......Looking at the monetary policy and beyond, it is good to realise that growth is everyone’s concern, not just that of the government. Acting on its own priorities, the RBI has conveyed that message quite effectively.

Read - The Hindu

RBI will not be able to kick start the economy: Deosthalee

....... Reserve Bank of India’s policy is enabling kind of policy. So, they will not be able to kick start the economy. I think the interest rate environment is, to a considerable extent, sentimental. It is important, but it is not necessarily the only thing that can ignite the economy. So, under the circumstances, it was probably too much to expect rate cut because the inflation continues to be very high. Reserve Bank of India is concerned about the inflationary pressures both domestic inflation as well as imported inflation. Therefore, till inflation comes under some control, they are not likely to do anything............

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GCCI to take mining dependents' team to RBI

Panaji: Goa chamber of commerce and industry (President Manguirish Pai Raikar will lead a delegation of stakeholders from the mining industry involved in extraction and transportation business, to Reserve Bank of India, Mumbai, next week........

Read - TOI

RBI urgings on trade policy

.........there had been an increase in the number of unmatched export transactions between Customs and bank reports, impacting export realisation follow-up. Based on the recommendation of a working group set up to identify lacunae in export reporting and follow-up procedures, RBI decided to put in place by September 2013 a structure to implement an information technology-based solution, using a secured website of the RBI to update the export database on a real time basis. Hopefully, this will facilitate quicker follow-up/data generation/policy formulation...........

Read - BS

Hedging habit

.....The central bank has opined that the forex rates are determined by the demand and supply of that particular currency. Why should a corporate hedge its forex future exposure, be it a purchase or sale? Hedging is a cover to limit the loss on forex exposure. Intra day rate fluctuations at times move up to one rupee per dollar. The RBI directive highlighted in the editorial pertains to charging of higher risk premiums on loans made to corporates which have not hedged their forex exposure. But the compulsion to hedge may not be justified under regular rate fluctuations.......

Read - HBL

Retail customer is king

........They were once ignored, but retail customers are now the darlings of banks and financial institutions. The slowdown in the global and domestic economies and high interest rates have prompted corporate clients to tap into other channels including foreign sources, like External Commercial Borrowing (ECB), to raise funds..............

Read - The Hindu