Financial reforms: Relevance to the Common Person - S.S.Tarapore

.....Witness the Approach Paper's slant of cutting down the Reserve Bank of India (RBI) to size by taking away a large part of the domain of its operations, ostensibly, on the ground that the RBI should exclusively focus on monetary policy. The Bond- Currency- Derivatives markets will be totally out of the purview of the RBI. A glaring feature of the Commission's recommendation is to take away capital controls from the RBI and to lodge this in the Ministry of Finance- all in the name of Full Capital Account Convertibility! Consistent with the stance of the Approach Paper it can be inferred that the RBI would have no say in exchange rate management and forex markets, and therefore, forex reserve management. The RBI's handling of the 1991 forex crisis is internationally recognised, as is its gradualist approach to capital account convertibility. This whole issue is not only whether India abolishes capital controls altogether but an issue of managing the entire external sector. It would be a monumental blunder to go along with the FSLRC recommendation to strip the RBI of its role.......

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RBI-FinMin conflict of views is old hat in India

......Chidambaram needs to understand the RBI’s role in the country’s economy and gracefully acknowledge it. The key area where things began to clash is when the government seemed to go public on some of its preferences but without being prepared for the consequences. When Subbarao took over as RBI Governor, the initial perception was that since he is from North Block, the Government (read: MoF) could manoeuvre him, especially on the (interest) rate front. However, Subbarao turned out to be a part of that disappearing breed of civil servants who not only know what they are doing but are also willing to make timely decisions – without any fear or favour – and accept responsibility for them. It’s too bad for his critics, as he knows macroeconomics well.

Read - Deccan Herald

RBI, govt not antagonistic to each other: Chidambaram

.......Even as the government makes out a case for the central bank to support growth, it doesn’t mean “they (the Finance Ministry and the RBI) are antagonistic to each other”, he said. “What we are trying to do is to argue our case, argue the case for growth, argue the case for taming inflation and then of course whatever the judgement is arrived at…,” 

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Why RBI and FM must both do their own things

The perceived difference of opinion between the Finance Minister and the Reserve Bank of India (RBI) Governor appears to be out in the open. If true, it is an indication of the frustration both sides feel since we do not appear to have made progress either on growth or tackling inflation. The ministry and the central bank have been tossing the ball into each other’s courts—and both have been taking some actions—but interest rates do not look like coming down fast enough to lift growth sentiments. How exactly do we deal with this situation?..........

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No end to central bank’s woes

.........I hear that the constitution of a search committee does not automatically disqualify Gokarn for another term. If the committee is convinced, he can get another stint at RBI, or someone else could replace him. There is nothing wrong in forming a search committee to identify a suitable Deputy Governor, but why does the government have to wake up so late for such a critical appointment? .............

Read - Mint

A panchayat sans ATMs in 100% banking district

.....Under the prevailing banking norms stipulated by the RBI, service cooperative banks are among the several entities which are not eligible to be called a bank, despite doing business in the financial sector. Though the RBI had brought the issue to the notice of the authorities in the State, the opposition by the cooperative sector had forced the apex bank to withhold the move in the State, according to sources in the banking industry. Such banks could face the axe of the apex bank, as and when the existing waiver on nomenclature is reversed........

Read - The Hindu

Nabard mandate will be safeguarded: Namo Narain

The Centre remains committed to safeguarding the mandate with which National Bank for Agriculture and Rural Development (Nabard) has been set up. This clarification has come from Union Minister of State for Finance Namo Narain Meena in a letter to Tapan Sen, Member of Parliament, dated November 5. Nabard has been formed by an Act of Parliament, the Minister recalled...........

Read - HBL

Courage Under Fire

......Perhaps her grounding in turning around a ‘weak’ operation started in her role as the CEO of Bank of India’s New York operations way back in 1995. That stint also helped her understand the importance of close engagement with bank regulators, which stood her in good stead while dealing with the Reserve Bank of India (RBI), both in establishing institutional credibility and in securing RBI’s and the government’s  support for a number of vital matters.........

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Fraud e-mail on internet banking

.........“The mail has referred to provisions of Banking Regulation Act, 1949 and Prevention of Money Laundering Rules, 2005 and informs bank account holders about RBI setting up a new 24x7 Centralised monitoring centre to monitor financial transaction flow from internet banking accounts. The e-mail then gives a link asking account-holders to update their account information,” a statement issued by RBI said here. “RBI clarifies that it has not sent any such mail and.........

Read - The Hindu

Effect of central bank independence in a graphic

.....This alone should be reminder to those at the North Block when they appoint the successor to Dr Subba Rao next year. The hard won credibility of the RBI can be squandered in one moment of madness.

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Ethical principles that banks need to follow

....Until July 1, 2010, banks had got into the unfair practice of sub-PLR lending to certain borrowers. Fortunately, the RBI constituted a Working Group on BPLR (Chairman: Shri Deepak Mohanty) and Base Rate system came into being. Since then the administration of lending rates has become transparent, an essential quality expected from entities like banks at all levels. Ethics should dominate customer service rendered by banks. Business etiquette should be an integral part of ethical customer service. Bankers need to be trained in this line. Fundamentally, banks should not differentiate customer service rendered to a small customer and a large customer........

Read - HBL

State govt sore with SBI, other banks; complains to RBI

BHOPAL: Commissioner Institutional finance Ashok Shah, in a letter to RBI Deputy Governor Dr K.C.Chakrabarty has complained that the State Bank of India ( SBI) and its associates and some of the Regional Rural Banks were not doing what was expected of them. He also referred to the decisions taken in the last state- level Bankers’ committee (SLBC) meeting. Shah said, ” Dr Chakrabarty had expressed a deep concern over lack of network of bank branches in villages. RBI has relaxed licensing rules for opening bank branches in rural areas.........

Read - FPJ

We have a banking licence: MSC Bank

PUNE: In response to the recent statement of RBI Governor D Subbarao, the Maharashtra State Co-operative Bank Limited has stated that it has a banking licence which the Reserve Bank of India had issued earlier this year. Subbarao had said in the city on Friday that the bank was still not eligible to get a banking licence and was under RBI's 'directions.' The bank's general manager, Vijay Bhagat, said in a communication that the MSC Bank had complied with all norms and conditions prescribed by the RBI which has issued a banking licence to it on April 19, 2012........

Read - TOI

Both CCI and RBI To Vet M&As In Banking

While CCI will see competition part of such deals, the RBI will see prudential aspects

....."For M&A activities, they (banks) will have to seek Reserve Bank approval from prudential point of view. RBI is the sectoral regulator so the health of banks is the concern of the RBI, health of banks is not CCI’s concern, CCI’s concern is their behavior in the market and the consumer in the market," ......

Read - BS

Economy looks at govt for help, govt at its shoestring coffers

.....It is a chain of inaction on all fronts. Investment-led growth seems out of question as a vicious cycle emerges here- high inflation is reducing purchasing power of households, private sector not investing due to lack of demand plus high interest rates, RBI not cutting rates as it expects government to take action on fiscal front as inflation is high, government unable to spend due to widening fiscal deficit, and so on. “There is a sqeeze from all ends”, said Sabnavis. Somebody will have to break this cycle, be it RBI by cutting rates or public sector units sitting on cash pile up of over Rs 2 lakh crore. But RBI measures will have a lag effect, while investments by public sector units will not come immediately........

Read - BS

Why more Banks?

Kudos to Duvvuri Subbarao, Governor, RBI who has said that no new banking licence will be given without legal backing ('FM proposes, RBI disposes on licences') The Governor’s assertion that the Apex bank is not in a hurry to issue banking licences to new private banks despite pressure from the Finance Minister is really laudable. We already have umpteen number of banks — both government and private — in our country and a careful study of the functioning of these banks would reveal an inadequacy in expected achievements despite the absolute freedom given to them by both the Finance ministry and the Apex bank.Political interference has crippled the growth of government banks. Also, by virtue of their inherent lethargy, the public sector banks never extend good service to their deserving customers, while the private sector banks earn their cake by making the middle income group pay heavy interest and penal interest through their nose.

—Tharcius S Fernando, Chennai (DNA)

Govt pressures RBI on bank licence

...........In a letter addressed to RBI Deputy Governor Anand Sinha, financial services secretary D K Mittal said the government hopes to get the Banking Regulation Bill 2011 passed during the winter session. The letter pointed out that RBI doesn't need to wait till the bill is passed as under certain existing laws the banking regulator has the powers to govern these entities. "In any case, if RBI issues the final guidelines, the process of granting a licence to a new private sector bank would take six months to a year, and in the meanwhile, the bill would be passed. Even before the bill is passed, RBI would have adequate powers ... " says the letter. The letter , a copy of which is with TOI, was sent just days before finance minister P Chidambaram asked RBI to issue final guidelines for new bank licences earlier this week........ 

Read - TOI

Triple whammy

It is fairly common nowadays to receive unflattering reports on the economy. After all, the slowdown in the economy is all too evident. Periodic reports, both official and unofficial, have recently tended to focus on the negative aspects. However, receiving three sets of worrisome economic data on the same day is something unusual..........

Read - The Hindu

A case of misreading risks

.....The 2012-13 budget had no provisions for taking stock of, and overcoming, uncertainties. In a very different context, Y.V. Reddy, former Governor of the Reserve Bank of India (RBI), pointed out the dangers of not appreciating risks in formulating and implementing the 12th Five-Year Plan. While the time horizon for the two—the Plan and the budget—are different, the principles of appreciating risks and uncertainties (ignoring the difference between the two) are not divergent.........

Read - Mint

Is there a method to the ‘flop show’?

......Like CAG, the Reserve Bank of India, too, has come under intense pressure. When the apex bank, much to the chagrin of the fiscal mandarins, did not reduce the policy rate, the Finance Minister P. Chidambaram said, “The government will walk alone”. By saying so, he sort of revealed his upset mind. There have been not-so-subtle suggestions to the Governor to rethink on the RBI stand on the policy rate. The recent spate of avoidable public interludes between the Government and the heads of Constitution-backed institutions show up the entire system somewhat negatively. This is not doing well either to the country, in general, or to the economy, in particular. What is required is co-operative co-existence and not demonstration of one-upmanship.

Read - The Hindu

Nirmal shines for RBI

Nirmal S smashed an unbeaten century to power Reserve Bank of India to a facile nine-wicket win over BDSA South Western Railway, Bangalore, in the KSCA Group II, Division II league match.....

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A new direction for financial inclusion?

It is crucial for RBI to realize the value of banking for the poor and refocus its efforts accordingly

....... it is crucial for RBI to realize the value of banking for the poor and refocus its efforts accordingly. But the solution won’t solely come from RBI’s efforts. Banks will need to envision long-term profitability as a possibility, and low-income customers will need to experience tangible benefits from the services offered. However, most importantly right now, the newly constituted committee will need to show that it has the guts and foresight to move past stagnation and onto a sustainable way forward.

Read - Mint

J&K Bank convenes DLRC, conduct fin lit camps

J&K Bank organized District Level Review Committee meeting in Shopian for the quarter ended September, 2012. District Development Commissioner Shopian Mohammad Javeed Khan presided over the meeting that reviewed the progress for the second quarter of current fiscal year. The meeting was attended by District Level Officers of government departments, representatives from all banks, NABARD and RBI........

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RBI Needs to Evaluate Principles of Islamic Monetary System

.........It is advisable that RBI should evaluate principles of Islamic monetary system and see whether those principles can guide India have better monetary policy to safeguard our banks, financial institutions, agriculture, industries, manufacturing industries, exports, currency value and more importantly with anti-inflationary but inclusive high growth rate. Hope RBI will genuinely review the matter seeing it as a national matter to resolve the country’s financial and economic issues instead of counting it as a religious issue related to minority community wherein scholars can have any say. RBI can hold Shariah Advisory Board as well as other technical boards to supervise and regulate Islamic Banking in India.........

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Speed of reforms will determine market direction

.....If the government addresses the fiscal deficit issue and global commodity prices remain soft, then inflation should move southward as we head into CY13. This should help RBI to focus more on spurring growth by reducing rates and this would be positive for long-duration funds.......

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Is economy out of rut as inflation eases? Experts discuss

 The inflation number is easing but the Governor of the Reserve Bank of India (RBI) says he is not impressed. How do you see the trajectory of inflation going forward? Do you think that atleast the momentum of inflation is behind us and the pace will decline further?.......

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Clear And Present Danger

.......Over the last five years, Indian banks, particularly the PSBs, have become more proactive in handling risk and compliance functions. However, asset quality continues to pose a serious challenge. Thus, the ‘capital’ (requirement of higher CAR) challenge will continue to occupy centre stage.

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Bankers’ Achilles Heel

Legendary investor Warren Buffet once said that you never know who is swimming naked until the tide goes out. As GDP growth in India declined in the last two years, banks suddenly found themselves saddled with more non-performing loans (NPLs) than they had bargained for. The Reserve Bank of India’s (RBI) report on Trends and Progress of Banking in India 2012 puts NPLs in the banking system at a rather high Rs 1.43 lakh crore (or Rs 1.4 trillion) at the end of 31 March 2012, the balance sheet date taken into consideration for banks............

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The year ahead: expectations and apprehensions

..........The winter session of parliament is important. While the government is keen to introduce new legislation, the opposition has a different agenda. The danger is that the upcoming parliament session may be a repeat of the monsoon session in spite of the persuasive efforts by the prime minister. Proposed reforms will most likely not go through, leaving the canvas as blank as it was before. But if reforms do go through, the economy will bounce back. As it is, the economy has to recover without much assistance from the government. That is possible if inflation comes down in the first quarter of 2013, as expected by the RBI. That will prompt it to reduce the rate of interest. If inflation drops to 6 per cent and the RBI cuts the repo by 200 bps over three-four months, there would be a qualitative change in the economy.........

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A Case For Prepaid

.....Electronic prepaid technology can potentially transform the provision of basic banking services to such individuals. ‘Know your Customer’ (KYC) requirements are much lower for prepaid instruments in most developed nations. Another key consideration is that the technology and operational cost of offering prepaid accounts is much lower than that of ‘no frills’ bank accounts, making it commercially more viable for banks and governments trying to extend banking services to these segments. The Reserve Bank of India’s Payment System Vision Document (2012-15) has, in this context, rightly identified use of e-prepaid instruments as one of the primary approaches to enable financial inclusion........

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Thriving In Adversity

....Most economists are not very optimistic about growth improving sharply in the near future. The central bank, which started raising rates from October 2011, has steadfastly refused to reduce them even by a token 25 basis points, despite suggestions by the finance ministry. Reserve Bank of India Governor D. Subbarao has said several times that his primary focus is to control inflation — and unless that comes down, it will be difficult for him to justify reducing the rates. But the flip side is that unless rates come down, many bankers do not expect the economy to pick up, or the credit offtake to improve.......

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‘Aadhaar only an identity proof, not address proof’

.....There has been confusion among banks over accepting Aadhaar as the sole “know-your-customer” (KYC) proof. The Reserve Bank of India (RBI), in a notification, had also insisted that the banks satisfy themselves that the address contained in Aadhaar is correct. “As per RBI guidelines, Aadhaar is enough for meeting know-your-customer requirements for no-frill accounts. But for large accounts, an address proof is also required along with Aadhaar,” Mittal told reporters after a meeting between finance minister P.Chidambaram and the chief ministers of six northern states.......

Read - Mint

Ganeshaspeaks: Rupee may continue to fluctuate heavily

Right from the beginning of the year 2013 till 31st May 2013, Jupiter will transit through the ascendant of India's country chart. This indicates that India's growth will remain gradual yet it will be persistent. As the transiting Jupiter will be aspecting the 7th House, India's continual exercise to maintain good terms with its enemy countries will continue (it may still remain futile, though). From 1st June 2013 till the end of the year 2013, Jupiter will be transiting through the 2nd House of India's country chart, where Natal Mars is posited. As a result of this transit, the Reserve Bank of India (RBI) may take necessary steps to boost the Indian economy.......

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RBI must enter forex market to support Rupee, curb inflation: BoA-ML

Leading US brokerage Bank of America-Merrill Lynch (BofA-ML) has called upon the Reserve Bank to enter the forex market and buy dollars to recoup the rupee and thus arrest the imported inflation, which is the main reason for the continued price spiral..........

Read - ET

Public-sector 'wives' better placed?

...........RBI had introduced the base-rate mechanism with effect from July 1, 2010, to take care of this problem, but it has clearly failed to address the issue. There has been a small positive step taken by RBI. Earlier, if an aware “wife” decided to switch “husbands” (pre-pay her loan and shift to another lender), she had to pay pre-payment charges to her current “husband”. This was adding insult to injury. At least RBI has ensured that the existing “husbands” will no longer be able to charge pre-payment charges. Hence, at least the more aware “wives” can be assured of a better deal. But, the regulator cannot wash his hands off the issue by just making the divorce cost less. They must ensure all “wives” get treated equally, whether or not the “wives” are aware of this. Meanwhile, the only thing that you can do if you are a “wife” (i.e. you have a floating-rate home loan) is to take a divorce from your lender and move to another as soon as he starts treating you like an old “wife”...........

Read - BS

The Strategist Quiz (#280)

........What is common between the Hong Kong Bank, Standard Chartered Bank and Reserve Bank of India buildings in Mumbai and the richest man in Ireland of the year 2011...........

One lucky winner will receive a cheque for Rs 2,000. Send your entries to strategist@bsmail.in. All entries must carry the postal address of the contestant. Last date for receiving entries: November 20, till 8 pm. Previous winners and employees of Business Standard and their families are not eligible to participate.

Read - BS

Bank for the buck

....‘After Times Bank was set up, the RBI observed that there were certain regulatory issues pertaining to its promoters. We were not very comfortable with them. It was informally discussed with the chairman of the bank who volunteered to step down from the board of directors. In course of time, the bank was persuaded to voluntarily merge with some other bank.’........

Read - Mint

Forfait trade gets new global rules

.....In India, forfaiting as an export financing option has been approved by the Reserve Bank of India. The facility is to be provided by an international forfaiting agency through an authorised dealer (see RBI Circular 42 A. D.(M.A.) series dated October 27, 1997). Forfaiting proceeds, on a without recourse basis, are to be received in India as soon as possible after shipment but within the period specified by RBI for realisation of export proceeds........

Read - BS

Gujjars file petition against two J&K banks over non-representation

......."We have filed petition against two J&K banks before National Commission for Schedule Tribes (NCST) and Reserve Bank of India (RBI), accusing both for not implementing reservation in recruitments and promotions for schedule tribes of the state at various levels," ..........

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City urban bank’s merger with COSMOS soon

Merger of the Bhubaneswar Urban Cooperative Bank (BUCB) with the COSMOS Bank has reached a final stage with the State Government issuing a clear-cut direction to the State’s Registrar of Cooperative Societies (RCS) to go ahead with the amalgamation process.........

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