The very purpose of VITALINFO is to provide a platform for wider dissemination of updated information related to and happening of events in and around RBI.
Saturday, December 1, 2012
FM’s pushing too hard
Microfinance in Banking Industry: Challenges faced by the banks
....The Reserve Bank of India appointed a sub-committee of its board to look into issues concerning the microfinance sector and its implications on policies of the banks. Then the RBI Deputy Governor said “Already banks have been allowed direct lending at a small charge in remote areas through business correspondence and technology have been introduced to reach out the unbanked areas” With a view to improve poor people, a pilot project for providing micro credit by linking Self-Help Groups (SHGs) with banks was launched by National Banks for Agriculture and Rural Development (NABARD) in 1991-92 with a view to facilitating smoother and meaningful banking with the poor. RBI had then advised commercial banks to actively participate in this linkage programme. The scheme has since been extended to Reginal Rural Banks (RRBs) and co-operative banks.......
Panel to probe defunct RBI unit's functioning
VADODARA: The syndicate members of M S University (MSU) on Friday constituted a four-member committee to probe the functioning of Reserve Bank of India's Endowment Unit in the last 10 years. The committee has been asked to submit its report within six weeks. The decision comes in the wake of embarrassment that the university faced last week after country's apex bank dragged the state university to an Ahmedabad court by filing a civil suit demanding recovery of Rs 97,63,000 for not appointing a RBI chair professor.......
Govt proposes high-level committee to check investment frauds
New Delhi: With an aim to safeguard the investors from possible frauds involving collective investment schemes, the government has proposed a high-level committee of members from Reserve Bank, Sebi, Corporate Affairs Ministry and Economic Office Wing of state police departments. The Finance Ministry has requested all states and union territories to set up such a committee to enable enhanced information-sharing among the concerned agencies.........
Technical committee to review presentation of accounts
........The terms of reference, in brief, of the Committee are: Whether the existing presentation of two separate Balance Sheets of Issue and Banking Departments needs to be merged into a single Balance Sheet of the RBI. Whether it is necessary to have separate Profit and Loss Accounts for the Issue and Banking Departments or whether the present form of a combined Profit and Loss Account will continue. Whether the disclosures presently made in the Balance Sheet and Profit and Loss Account and the notes to accounts are adequate or can be elaborated/ improved. The Committee will comprise Y. H. Malegam, Director on the Central Board of the RBI as Chairman. Indira Rajaraman, Director on the Central Board of the RBI, B. Mahapatra, Executive Director, RBI, P. R. Ramesh, Chairman, Deloitte Haskins and Sells, and V. Venkataramanan, Partner, KPMG, are the other Members. S. Ganeshkumar, Chief General Manager, Department of Government and Bank Accounts, RBI is the Member-Secretary..........
Dangers of letting govt print money
What if there was a financial system that would eliminate the need for the central government to issue government of India bonds through RBI to fund the fiscal deficit or that would end the practice of fractional reserve banking through a CRR of 4.25%? A surprising new IMF research paper entitled ‘The Chicago Plan Revisited’ by Jaromir Benes and Michael Kumhof is making waves in economic circles, especially with monetarists. The paper suggests that the world would be much better off if we adopted a system where the banks did not create our money. So, instead of a system where more money is only created when more debt is created through the money-multiplier effect, we would have a system of debt-free money that is created directly by the central government. There have been others that have suggested such a system before, but to have an IMF research paper actually recommend that such a system be adopted is a big deal...........
Money for nothing
......A former RBI Governor, Y V Reddy, put the situation in perspective in a paper presented to the Bank for International Settlements in June. He said: “In 2001-02 the problem was one of slow credit growth. We described it as lazy banking and tried to encourage banks to improve credit growth with regulatory and monetary policy initiatives. Soon the lazy bankers became crazy bankers. Excess credit seems to have been preceded by slow growth in credit. The problem is to identify the point at which credit growth becomes excessive or too rapid.”............
RBI launches inflation expectations survey of households
New Delhi, Nov 30: The Reserve Bank of India today launched the 30th round of the Inflation Expectations Survey of households with reference period October-December 2012. The central bank has been conducting the Survey on a quarterly basis since September 2005. The Survey seeks qualitative responses from households on price changes (general prices as well as prices of specific product groups) in the next three months as well as in the next one year and quantitative responses on current, three-month ahead and one-year ahead inflation rates, a central bank handout said. Giving details it said the results of the Survey are being used by Reserve Bank as one of the important inputs to the monetary policy formulation.........
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REC decides not to apply for bank licence
.....The finance ministry is nudging RBI to issue new bank licences within the current framework, while assuring the law will be amended in due course of time. However whether public undertakings can establish new banks would be clear only after RBI issues the final guidelines on new licences. Media reports earlier suggested REC, PFC and IFCI were in talks with two foreign banks to jointly establish a new bank, to create more reach and have a diversified ownership.......
Barclays says RBI unlikely to cut rates on Dec 18 review
The Reserve Bank is unlikely to cut the repo rate before the end of January, British brokerage Barclays Capital said on Friday. "Repo rate cuts, which should lead to an actual easing of call money rates, are not expected before late January," it said in a report released here.......
Woman held for duping businessman of Rs.10 lakh
......."They sought Rs.10 lakh from the complainant for getting the money from IMF. The victim transferred the money into two accounts. The complainant also received emails purportedly from IMF and RBI (Reserve Bank of India) intimating him of the clearance of the said amount," said the officer. Rahmatullah got suspicious when he received a phone call purportedly from the RBI asking him to transfer another Rs.1.20 lakh for further clearance. "When the complainant verified the authenticity of the e-mails from RBI, it was found to be bogus," ......
A long haul
.......To expect the growth rate to travel sharply upwards from here is, however, to be more optimistic than what the data warrants. The 5.3 per cent GDP growth rate for the second quarter of 2012-13 means the economy has grown at just 5.4 per cent in the first six months of the year. To reach the RBI projected 5.8 per cent growth rate for the year means the economy would have to clock an average of 6.2 per cent in both the December and March quarters. On the way, it will have to counteract the recessionary conditions in Europe and a US economy swinging between recovery and another recession............
Read - IE
Rate cut to 2009-10 level key to recovery: Ajay Shankar
.....A revival would primarily depend on the easing of interest rates by RBI to 2009-10 levels; the industry would like this soon enough. The revival would be strengthened with a competitive exchange rate so that domestic value addition isn’t at a disadvantage. An increase in investments in infrastructure, especially in roads and power plants, would stimulate industrial demand. This should, hopefully, happen soon enough, as identified bottlenecks are removed.
FII limit in G-Secs, corp bonds hiked
.....The government, which is battling a high current account deficit (CAD), is trying to attract more foreign funds into the country. CAD, which is the gap between inflows and outflows of foreign funds, was a high of 4.5 per cent in 2011-12. In the current fiscal, CAD is expected to ease to 3.5 per cent. In order to contain CAD, the RBI has already imposed restrictions on financing of gold purchases to curb speculations of the yellow metal......
Public sector banks may extend ‘festival offer’ on retail loans up to March-end
........As per Reserve Bank of India data, since the beginning of the current financial year and up to October 19, banks’ home loans have increased by Rs 25,800 crore and auto loans rose by Rs 9,100 crore. Since the growth in loans for consumer durables has been low in the financial year so far, Finance Minister P. Chidambaram has asked PSBs to consider further steps to promote credit flow to this sector.
Growth pick-up will depend on RBI policy: Sajjid Chinoy
...........If the politics gets more constructive and authorities can push ahead with the National Investment Board, a balanced land acquisition policy, and boost sentiment (so that the rupee appreciates and has a disinflationary impact allowing the reserve bank to ease monetary policy more aggressively), growth is likely to pick up in 2013. Else, the key drivers of the slowdown in the Q3 2012 are unlikely to go away in a hurry.
Struggling for a Six: The great GDP growth challenge
.......A little help from Mint Road and Subbarao would do wonders, but much of the task will have to be done by Chidambaram himself. The pace of reform holds the key. Even after the GDP figures came in on 30 November, the 30-share BSE Sensex held strong, at well above the 19,200 mark as the market continued to remain bullish on the reform agenda. However, the veteran of many a battle, Chidambaram knows only too well that bourses can be fickle.........
No chance of a sixer!
............With GDP growth in the first six months clocking just 5.4 % we will have to grow 6.3% in the second half to realise the RBI’s projected growth of 5.8% for the year. That’s a tall order, though not impossible. The only catch is that given the government’s track record to date, I would not put my money on it.
Read - ET
It’s a real race against time
.....It has been obvious to observers, notably the central bank, for some time now that the government will have to get its expenditure under control before the economy can step back on to a higher growth path. The RBI has made lower interest rates conditional on fiscal rectitude and the government has reacted by biting the reform bullet. Subsidy diversion is being trimmed through innovative cash transfers, an efficient goods and services tax is back on the table and infrastructure investments are sought to be put on the fast track......
This is the bottom: India GDP unlikely to go below 5.3%, say experts
.......“From the RBI perspective, this number should not make much difference because the central bank’s full-year estimate is similar to this. Also, this data is two months old and the RBI will be looking at current trends. The sentiment has improved, we need to see whether the industrial production data also shows improvement. “I don’t think the RBI has completely disregarded the weakness in growth, but we need to see the next two inflation readings..........
Options in gold
.....However, it is not yet clear whether RBI will make regulations needed for other banks and financial institutions to launch such products or would associate itself with these products. In any case, its intention is to curb physical import of gold, which has been weighing heavily on the current account deficit (CAD) of the country. In the financial year 2011-12 (FY12), the country had imported 1,067 tonnes of gold worth $60 billion. Some of the products mentioned by Gokarn were modified gold deposit scheme, gold pension plan, gold-linked account and gold accumulation plan......
Should gold loans be banned?
RBI’s move to prohibit bank financing of gold comes as no surprise. the question is, will it work? is there a mechanism to segregate the speculators from those who genuinely need money against gold?..........
Read - IE
Not much sound in Kelkar Committee
.....the committee talks of how the fiscal deficit has crowded out the private sector. While this is a theoretical outcome, in our context, this has never really been proved in the last two years. RBI has never stated that it has raised rates because the government was borrowing too much. It was an anti-inflation stance that provoked such action. Second, liquidity has never been an issue as banks were never constrained to lend to the private sector because of paucity. RBI has supplemented well with open market operations to ensure that the mismatch was corrected......
Read - IE
HSBC scraps its plan to buy RBS India assets
......However, the Reserve Bank of India (RBI) was not comfortable with the structure and directed the banks to re-work the deal. It is learnt that the banking regulator was of the view that RBS cannot sell its India branches to HSBC as part of the transaction. RBI follows a restrictive policy of offering branch licences to foreign banks. In a year, the RBI typically offers foreign banks around 12 branch licences in total. As per the revised structure of the deal, RBS was supposed to surrender its branches to RBI while the banking regulator will finally decide the distribution of these licences among foreign banks in India. While sources indicated that RBI had permitted the transaction as per the re-worked structure and has allowed transfer of some RBS branches to HSBC, the deal was called off as the banks failed to reach an agreement on certain parameters......
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