RBI and the chicken game

........of all the “strategies” in this game of chicken—chickening being slowing in face of a speeding automobile—one vehicle speeding away and the other slowing is the most frequent solution. A similar game has been played for a while between the finance ministry and the Reserve Bank of India (RBI). It is, of course, rash to try and understand monetary and fiscal policy coordination failures by looking at vehicular aggression on Delhi roads. But the behaviour of India’s fiscal authority—its finance ministry—is not very different from that of speeding drivers. Consider two recent episodes—useful for analysing the repeated play of the chicken game........

Read - Mint

Differences with RBI governor is media creation: Chidambaram

......"I have already explained about the....media created differences between Government and RBI (Governor)", he said when asked if "his problem with RBI Governor is because he did not oblige with rate cut".......

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The unsavoury hurry over new bank licences

.......By now it has been established that the ostensible reason for more bank licences as expressed two budgets ago—more financial inclusion—is arrant nonsense. This author had, in 2006, done an exercise in banking market concentration around the world, which showed that India was the third-most fragmented market. Some water has flowed under Mint Street since then—with the disappearance of the likes of Centurion and Bank of Rajasthan—but the essential point remains the same: if such levels of competition have not helped the cause of financial inclusion, a few more licences will not accomplish that.......

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Coincidence

When he moved to Mumbai as RBI Deputy Governor, Subir Gokarn retained his Delhi mobile number. Those who called him on it yesterday heard this recorded message from the mobile phone company: “The number you are calling is temporarily out of service.” Hopefully the number, and Gokarn, will be back in service soon—Gokarn’s term comes to an end on November 23 and there is, as yet, no clarity on whether he will get an extension. He is, however, slated to speak at a banking conference on November 25—immediately after his term comes to an end—suggesting he may have been given an extension.

Read - FE

RBI prefers a law

...........North Block seems to have ignored the message in Subbarao’s remark: the central bank would prefer the powers came through a legislative amendment. The powers given outside the Act could come with stings and be taken back similarly — without a legislative process. Statutory bodies such as the RBI should not be made subservient to the whims and fancies of officials in ministries. The central bank has faced problems on such issues relating to banks earlier due to lack of clarity of law. 

M.G. Warrier, Thiruvananthapuram

Read - HBL

Banks can open admistrative office in large cities sans RBI permission

MUMBAI, NOV 20: 

Banks need not seek permission of the Reserve Bank to open administrative offices in large cities (Tier-I), the central bank said today. “With a view to further increasing operational flexibility of banks, it has been decided to permit domestic scheduled commercial banks (other than RRBs) to open offices exclusively performing administrative and controlling functions in Tier-I centres without the need to obtain prior permission,” it said in notification today....

Read - HBL

HDFC Bank launches mobile banking in Hindi

Indore: Targeting 560-million Hindi-speaking population, the second largest private sector lender HDFC Bank today launched a mobile banking application in the national language. Mobile banking services is part of the bank's overall strategy to use convergent communication platform to engage with customers, ...........

Read - FE

Bank to start scheme to help girls’ education

 The Mann Deshi Foundation of Satara, working for the empowerment of rural women, has come up with a scheme for girls to pursue education beyond Std VIII. Under the scheme, a girl can open a bank account on which the bank will add 5% interest as well as deposit 5% of the cumulative savings and interest earnings as its contribution..........

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Corporates, banks taking undue advantage of CDR mechanism

....."If the reason for the recent increase in restructured accounts is indeed the economic downturn, it should have been reflected across all bank groups and not just public sector banks," said K.C. Chakrabarty, Deputy Governor, Reserve Bank of India (RBI) at a seminar last August. If a company is unable to meet the new demands it has agreed to under CDR, or wriggles out of them, the restructured assets turn into non-performing ones. This is precisely what is happening. ....

Read - Business Today

No move to give SLR status to corporate bonds: RBI

Reserve Bank Deputy Governor HR Khan today indicated there was no move at present to give SLR status to corporate bonds. "We had a meeting with the Finance Minister (P Chidambaram) recently. But, I think, nobody is serious about giving SLR status to corporate bonds," Khan told reporters on the sidelines of an RBI-ADB summit........

Read - BS

RBI Governor D Subbarao on the state of banking industry and challenges it faces

......We believe more banks should come in but some necessary conditions (such as amendments to the Banking Act) have to be fulfilled. I don't think it is possible to issue new licences without changing the Act. The old guidelines did not contemplate the entry of corporate houses into banking. If we allow corporate houses, it's important we have the amendment or the authority we have sought......

Read - Business Today

US has issue with dollar swaps as Re not fully convertible

Reserve Bank of India Governor D Subbarao believes a central bank should intervene in the forex market "only to manage economic stability disruptions". Analysts had called upon the RBI 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......

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RBI seeks alternative to $

Even as China tries to promote the Yuan as an international currency, Reserve Bank of India (RBI) has joined the effort of chipping away at the dollar's pre-eminent position as the world's currency. The central bank on Monday called for inclusion of emerging market currencies as alternative reserve currencies to the dollar.  Delivering the 46th A D Shroff Memorial Lecture in Mumbai on Tuesday, RBI Governor D Subbarao said that the dollar's monopoly as a reserve currency had resulted in many countries facing a liquidity problem as foreign creditors and foreign investors turned risk averse. "Paradoxically, even as the US economy was in a downturn, and its central bank resorted to extraordinary quantitative easing, the dollar strengthened as a result of flight to safety," Subbarao said. ......

Read - TOI

Spend more on productive purposes, Subbarao tells government

Highlighting the need for government spending on productive purposes, Reserve Bank Governor D Subbarao today said future generations should not pay the price for the high borrowing of today. "Government borrowing is not necessarily bad, but if the government borrows and consumes, that is bad," ........

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No-flub account

...... In the middle of her passionate plea for financial inclusion, she paused to ask the official sitting next to her, “What do you call them, free-fly...?” It took the Delhi chief minister a little while to understand the term. Only with a bit of effort could she finally pronounce the phrase “no-frills accounts”.

Read - BS

RBI harmonies definition for Infrastructure lending

Reserve Bank of India has harmonised the definition of infrastructure lending for financing by banks and financial institutions to avoid confusion. The definition has been aligned with the master list of Infrastructure sub-sectors’ notified by the Government on March 27, 2012....

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SLBC forms sub-committees to improve service

.....In a bid to boost export activities in the state, the SLBC also set up a sub-committee to give inputs for improvement of untapped export potential of the state. The sub-committee on export is formed as per suggestion of Khan and will have representatives from RBI, NABARD, SLBC, Odisha Export Promotion Council, financing bankers and exporters' Association.......

Read - BS

Alvi coop bank board of directors dissolved

VADODARA: In a significant move, following orders of Reserve Bank of India, the Registrar of Cooperative Societies has dissolved the board of directors of Alvi Cooperative Bank and appointed an administrator with immediate effect..........

Read - TOI

MINISTRY TO START SELECTION PROCESS FOR NEW BANK CMDs, EDs IN DECEMBER

The finance ministry will begin the process to select new CMDs and executive directors of PSU banks in December itself. Usually, this selection process takes place in January and February every year. The move to advance this is not an indicator of the ministry’s efficiency. Rather, insiders say, DK Mittal, secretary, for financial services, wants to complete the process before he retires in January 2013.

ET

Finmin Keeps an Eye on PSU Banks through Nominees

The finance ministry has devised a method to give directions to chiefs of state-run banks without appearing to be intrusive. Of late, the ministry has been issuing instructions to its nominee directors on issues that they should take up at board meetings, and marking a copy of the same to the chairman and managing director (CMD). Since these nominees represent the government, the ministry is well within its right to convey the concerns of the dominant shareholders through them. Earlier, the communications were addressed to CMDs which invited criticism from RBI for micro-management by the government.

ET

Keeping A check

.....The CTS is an online image-based cheque clearing system where cheque images and Magnetic Ink Character Recognition (MICR) data are captured at the collecting bank branch and transmitted electronically. The RBI, in a circular last year, emphasised that homogeneity in security features will act as a deterrent against cheque frauds, while the standardisation of field placements on cheque forms would enable straight-through-processing, both under CTS and MICR clearing.......

Read - Indian Express

Stocks of gold financing firms fall after RBI bans loans for buying gold

Shares in gold finance companies Manappuram Finance and Muthoot Finance fell on Tuesday after the Reserve Bank of India banned loans for buying gold in a bid to dissuade people from indulging in speculative activity.........

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Banks ready, but borrowers missing

.....“Inflation is a key reason for the high interest rate. Credit flow is muted as investments are not happening. While interest rate will fall as inflation comes down, what is key is speeding up investments in infrastructure sectors like power and road. The supply side bottleneck needs to be addressed, like fuel linkages in the power sector. Road projects also need speedy environmental clearances. If infrastructure investment is boosted, it will also have a favourable impact on sectors like steel and cement,”.....

Read - BS

Crisis of confidence hits banks, borrowers

......RBI has also noted that increasing risk aversion has hampered the flow of credit and as a result, banks parked their excess funds in government securities. “In contrast with the overall slowdown observed in the major balance sheet items of banks, growth in investments accelerated during 2011-12, compared with the previous year. This trend partly reflected increase in risk aversion by banks, with a growing preference to park funds in safer instruments, against the backdrop of weak macro-economic outlook as well as rising NPAs,” the central bank said.......

Read - BS

Is Dhanlaxmi Bank up for sale?

......Jittery investors pressed the panic button anticipating that the Reserve Bank of India (RBI) might now proceed for a forced merger of the private sector lender (with a bigger bank), which had gone through a management change in February, 2012. Markets were agog with names likeAxis Bank and HDFC Bank as potential acquirers......

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Dhanlaxmi Bank continues to see senior-level exits

....The All India Bank Officers' Confederation had accused the bank of window dressing its accounts to show inflated profits. The bank's management had dismissed these allegations and claimed that it was a motivated attempt to de-recognise the bank's performance.......

Read - BS

'Indian economy unmoved by reforms'

......Pending an infusion of new capital into the banking system, the government is seeking to counter the cyclical downturn by cajoling cash-rich state-owned firms to speed up investments. A better strategy would be for the government to curtail its own consumption expenditure and reduce its borrowings. More household savings would then be freed up for corporate investments, and not just by state-controlled companies. But fiscal consolidation in a slowing economy has to be gradual, lest it makes the short-term growth challenge worse........

Read - Express India

Bank to pay Rs 1L for refusing fresh cheques

A district consumer forum has asked the American Express Bank to cough up Rs 1lakh (Rs 50,000 each) as collective compensation to a couple for "causing harassment and more loss by unnecessary correspondence". The order was passed by the Consumer Disputes Redressal Forum after Ved Prakash and his wife Raj Pawar filed a complaint saying the bank had refused to refund or issue fresh cheques in place of the ones that were reported missing in Australia. .......

Read - TOI