Ministerial attacks on regulatory authorities deplorable

.....The constitution of the country, as well as the RBI Act, envisions complete autonomy for the Reserve Bank of India, as the prime custodian of the monetary policy of the country to shield the economy from any fiasco, arising from political muddling or populism. Notwithstanding this constitutional safeguard against any political interference in the working of the RBI, the FM’s repeated assertions using the words such as, “in our (government’s) view, the government and monetary authority must point in the same direction and also walk in the same direction. As we take steps on the fiscal side, RBI should take steps on the monetary side” are altogether unwarranted and amount to constitutional impropriety. Even the Prime Minister had to intervene, though gently, on the side of the RBI and justify the autonomy enjoyed by the RBI......

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RBI logo recalls treacherous British era

The British Crown had created the Reserve Bank of India (RBI) in 1935 and given to it an official status and a logo (hieroglyphic signature).  But why was such an institution needed? Hieroglyphic means ‘Chitra Katha’. What is the Katha of the RBI’s logo?.........

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Two nominees of RBI on LVB board

The Reserve Bank of India has appointed two of its senior officials on the board of Lakshmi Vilas Bank (LVB), apparently to safeguard the interest of depositors. The RBI has appointed R. Ravi Kumar and Ashok Narain, General Managers in the central bank, as additional directors of the private bank as per Section 36AB(1) of the Banking Regulation Act, 1949, the bank said in a filing to the BSE........

Read - The Hindu

Part of our life.............

Digest to disseminate I & K...........

Tell RBI your inflation expectations…

......The survey will ask you the amount of money you have to spent on food items such as milk, wheat, rice, chana dal and tur dal. Keep in mind that the result of this survey will be used by the central bank as one of the important inputs to its monetary policy formulation.

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Govt banks struggle to find people as old guard retires

.....The Khandelwal committee, which was set up to address the human resource challenges of state-owned banks, while acknowledging the manpower shortage banks are facing, said: “The leadership gaps in public sector banks are palpable. In the next five years, 80 per cent of general managers, 65 per cent of deputy general managers, 58 per cent of assistant general managers and 44 per cent of chief managers would be retiring.” So many people leaving at the same time has prompted the Reserve Bank of India to call the 10 years from 2010 to 2020 as the ‘decade of retirement’......

Read - BS

Government seeks 64 years as retirement age for public sector banks's chiefs

.....Government officials told TOI that the finance ministry has moved a proposal to the Appointments Committee of Cabinet, suggesting that banking being a specialized activity, it needed chairmen and executive directors with at least a five-year term instead of the average tenure of one-two years at present. In fact, it pointed out that in technical departments, the retirement age was already increased to 64 years and argued for a similar dispensation for bank chairmen and managing directors, a move which is being seen as a precursor to raise the superannuation age in government-owned banks over the next few years......

Read - TOI

An academic question

The Indira Gandhi Institute of Development Research ( IGIDR) in Mumbai is close to the fabled film city, so it was inevitable that the institute would receive proposals for film shoots on campus. Many years ago, IGIDR Founder-Director Kirit S Parikh said in his speech at a conference at the institute, film-maker Manmohan Desai wanted to shoot a scene there for a film starring Sridevi and Amitabh Bachchan. Sridevi was to play the daughter of a rich father who had studied at the institute. But, Parikh said, he did not allow the shoot because he believed that the institute’s academic contribution would be seriously compromised. The institute was established by the Reserve Bank of India.

BS

Why we need new banks fast

.....Subsequently, in 2003, two more new private banks were given licence -- Kotak Mahindra Bank and Yes Bank. The promoters had to bring in higher capital, Rs 300 crore each. This time too the objective was to intensify competition. Almost a decade since then, the competition has indeed intensified among banks but only on the urban turf and still at least 40 per cent of the nation’s adult population does not have access to banking services. Which is why India needs more banks. The RBI should not delay the process any more. It should go ahead and allow the “fit and proper” individuals, institutions and even industrial houses to set up banks.......

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P Chidambaram ask banks to play more proactive role in hiring their employees

The finance minister has asked chiefs of public sector banks to play a more proactive role in terms of recruiting their employee rather than being excessively dependent on Institute of Banking Personnel Selection (IBPS) to fill vacancies. P. Chidambaram conveyed this to bank chiefs at a meeting in Delhi while adding each banks should design its recruitment policy to suit its own requirement.  At present, IBPS screens and conducts a uniform online examination on the applicants on behalf of public sector banks. IBPS does not interview the candidate for the PSU bank, but has a say in directing candidates, who have cleared examination, to different banks for interview.  "Bankers have been satisfied with IBPS and recently some banks were thinking of asking IBPS to interview candidates on their behalf. However, the FMs view on the subjects will results into rethinking on this matter," said a banker present in the meeting............

Read - ET

Keltron core banking software for co-op banks

....The aim is to provide access to cost-effective package with total technology support to the cash-strapped cooperative institutions in the State. The changeover to core banking technology has now become imperative thanks to constraints associated with the legacy systems to deal with tough competition. All new-generation banks and almost all nationalised banks have completed the changeover to the sophisticated technology offered by core banking. But this has come at a price since they have all plumped for proprietary technology owned and services provided by big multinational companies......

Read - HBL

PIL against finance companies

The Madras High Court Bench here on Tuesday ordered notice to Union Finance Ministry and Reserve Bank of India seeking their reply to a public interest litigation petition alleging collection of exorbitant rate of interest by private non-banking financial companies such as Muthoot Finance Company and Manappuram Finance Company from those availing gold loans..........

Read - The Hindu

No need to change RBI's inflation comfort level, says Rangarajan

.....In 1998, Rangarajan had called inflation rate at six-seven per cent as “acceptable level”. His idea of threshold was: at what level of inflation do adverse consequences set in? “Then, inflation level was as high as 10-11 per cent, so cutting down inflation to six per cent was also very difficult,” said Rangarajan. He noted that high inflation created problems on the exchange rate side, and it was desirable to contain inflation to four-five per cent — a comfort zone as set by RBI. According to Deepak Mohanty, Executive Director, RBI, if inflation persisted beyond the threshold level of 4-5.5 per cent, it could lower economic growth over the medium term. In his paper titled “Inflation Threshold in India: An Empirical Investigation,” he said prolonged high inflation, even if originating from the supply side, could give rise to increased inflation expectations and cause general prices to rise.......

Read - BS

Govt's bank challenge

The new Basel III norms, which are to be implemented from January 1, 2013, should render the global banking system much less vulnerable. But their implementation starts at a time when Indian banking is under stress. Public sector banks (PSBs), which hold roughly 70 per cent of all assets, are in especially poor shape. There is provision for Rs 15,000 crore of PSB equity infusion in the 2012-13 Budget. But given decelerating growth and a big fiscal deficit, the government will struggle to recapitalise PSBs..........

Read - BS

926 bank branches in Mumbai, Navi Mumbai to receive advance tax

.....“As many as 926 computerised branches of public and private sector banks will receive advance income tax in Mumbai and Navi Mumbai. These arrangements have been made for the convenience of the income tax assesses,” RBI said in a statement on Tuesday.........

Read- HBL

Rs 32,000 fake notes at banks in a year

Raipur : Fake currency notes of over Rs32,000 were recovered last year from different branches of banks in the capital city. The counterfeit notes included currency denomination of Rs1,000, Rs500, Rs100 and Rs50, police said. Officials at the Civil Lines Police station said in all fake currency worth Rs31,650 were submitted with the police station that was deposited in Axis Bank Pujari Chamber Pachpedi Naka, SBI main branch, Union Bank, Bank of India, Tatyapara, in past one year. The notes were sent to Reserve Bank of India, Nagpur, for verification. After it was confirmed police registered a case against the unidentified person.....

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Concern in LS over ATMs dispensing fake notes

......Raising the matter during Zero Hour, RSP member Prashanta K Majumdar said circulation of fake currency in the country had grown to such an extent that counterfeit notes were conveniently finding way to banks and re-circulated through ATMs. He alleged that banks could be in collusion and those running the ATMs could also be involved. "The source needs to be checked. When ATMs dispense fake notes, those running them should be held responsible," .........

Read - FE

Simplify ECS, NEFT, RTGS, IFSC

Instead of bland ads RBI and all commercial banks ought to have come out with them much earlier. Most banks have neither issued new cheque books nor informed their customers of the impending change. The cheque books issued by my Bankers - Union Bank already bear this markings. Who says PSB are slow? Instead of discarding the old cheque leaves, the bank should encourage customers to make use of them for cash withdrawals, inter-account transfers within the branch like utility payments/yourselves and to customer within the same branch. The RBI should simplify ECS, NEFT, RTGS, IFSC by merging them with the account number so as to enable the customer to direct transfers to the account instead of having to repeat IFSC etc. for ECS and NEFT remittances. It can make life easy both for the customers and the banks. Can the RBI consider this and come out with appropriate Directions?

- Nagesh Kini (Moneylife)

Cheque truncation system: What is it, how will it benefit you?

......Though the RBI has given clear instructions to all banks to issue only multi-city payable at par CTS 2010 standard cheques , many banks are still issuing cheque books with CTS 2010 standard, but without specifying the fact that they are payable at par all branches. RBI should strictly enforce this basic requirement in the interest of making available this facility to all bank customers as a part of the up gradation of the clearing system in the country. At present a number of banks levy charges for use of cheques beyond a certain number of cheque leaves per month. The RBI should stipulate that the new cheque books issued under CTS 2010 in lieu of the old cheque books should not be charged for, if customers have already been charged for the old cheque books, as this change over is at the instance of RBI and the banks........

Read - Moneylife

Fiscal deficit is likely to stay closer to 6%: Economists

....Reserve Bank of India Deputy Governor Subir Gokarn had recently said that India’s fiscal deficit is somewhere around 5.5 per cent of the GDP and will take time to get back to 2008 levels. “The fiscal deficit was at 2.5 per cent in 2008… Due to build-up of subsidies following high oil prices, it grew to around 6 per cent of GDP and is now somewhere in the region of 5.5 per cent, Gokarn said at an Indo-Swiss Chamber of Commerce meeting. The RBI deputy governor said that the global environment has turned hostile and the markets were not recovering as fast as expected. As a result, the “exports are suffering”.......

Read - HBL

BS poll: Street divided on RBI action in Dec policy review

A Business Standard poll, conducted among prominent fund managers and economists, shows that the Reserve Bank of India (RBI) is likely to keep interest rates unchanged in its mid-quarter review of monetary policy, scheduled for December 18. However, the street seems divided on whether the central bank would opt for another cut in the cash reserve ratio (CRR).........

Read - BS

The new normal - A.Seshan

.....The Preamble to the RBI Act 1934 mandates “monetary stability” as its objective. Till the middle of the 1980s, it meant stability in prices or the purchasing power of the rupee. It has since been conveniently distorted to mean the stability of the inflation rate. The difference between the two interpretations, its impact on policy-making and the consequence for the common man can easily be guessed. While the judiciary cannot lay down policy, the interpretation of the law is its legitimate function. It is time for public interest litigation to know the Supreme Court’s views on the interpretation of the Preamble.

BS

What could be the new normal for inflation?

Former RBI Governor Y V Reddy has found takers among economists for his idea mooted recently that the central bank should revisit its normal rate for inflation from the current 4-5% since it was set before India was integrated with the global economy. However, Prime Minister's Economic Advisory Council Chairman C Rangarajan, himself a former RBI governor, favours retaining the current comfort zone in terms of inflation.........

Read - BS

Plea to reschedule loan repayment of MSMEs

....In a letter to the Regional Director of RBI, Chennai, President of VDMSEA M.V. Swamynatthan said the industrial production emerging from MSMEs in the State has shown declining trend in the last two years due to power crisis. As a result, the rank of MSME has slipped from the number one position at the national level as result of higher rate of closure......

Read - The Hindu

Moody’s outlook on Indian banks continues to be negative

Moody’s Investors Service’s outlook on Indian banks continues to be negative against a backdrop of slow economic growth, high inflation, high interest rates and a weak local currency. Moody’s, which had lowered its outlook on Indian lenders to negative from stable in November 2011, said on Tuesday that its view for the next 12-18 months remained negative as it expects “these factors to lead to a further deterioration in asset quality, an increase in provisioning costs, and a fall in profitability”.......

Read - Mint

RBI, Bank of Japan agree on currency swap arrangement

The Reserve Bank of India (RBI) and the Bank of Japan on Tuesday agreed on a currency swap arrangement against the dollar for up to $15 billion that will be valid for three years...........

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Why FDI debate in Lok Sabha interlinked to one on FEMA amendments

When Parliament debates the amendments to the Foreign Exchange Management Act (FEMA), it will be taking up five critical changes to the law notified by the Reserve Bank of India (RBI) between May and October this year...........

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IDBI deputy MD's selection process under lens

....The ministry was pushing Rego's case after the Appointments Board, headed by RBI governor D Subbarao, marked him as the top choice for one of the two deputy MD posts at IDBI Bank, which is lying vacant for several months. But within a few weeks, the personnel department wrote to the financial services wing pointing out certain shortcomings. It said that during 2007-08 and 2008-09, Rego's work had been praised, but the rating had not been changed. The financial services department, however, upgraded the ratings from "very good" to "outstanding" and gave him a score of 70 instead of 66, which had also been given to another candidate who was a contender for the job........

Read - TOI

Gold addiction

RBI deputy governor Subir Gokarn has said that the only way to save the widening current account deficit—and hence the rupee—is to get Indians de-addicted from gold. Referring to it, your editorial “Curing Indians of gold” (FE, November 28) has welcomed RBI’s move for the launch of gold-backed instruments. It is one side of the coin. But we cannot ignore the consumer demand also. Today, ornamental gold sale is thriving and its advertisements are choking the media. Though ornamental gold might have helped people in some way by its ever-increasing value, for raising loans etc, the craze for gold ornaments is in a way also a curse for the Indian society. Besides many risks, it is also the source of dowry evil !

- Jacob Sahayam, Thiruvananthapuram (FE)

Gold Loans Help Aam Aadmi

.....Unfortunately, even a 4% duty has sufficed to revive gold smuggling: customs seizures are up. Former RBI Governor C Rangarajan has said that raising the duty further will be counterproductive. Another former Governor, Y V Reddy, has asked, "If Mercedes-Benzes and aftershave lotions can be imported, why not gold?" I would go further. If Tata and Birla can use billions in foreign exchange to buy companies abroad though many acquisitions have been duds — why prevent the aam aadmi from also using a little foreign exchange to invest in a dollar-denominated asset like gold?........

Read - ET

Should RBI allow banks to buy back gold?

....The Reserve Bank of India should not allow banks to buy back gold. That could possibly result in currency devaluation and inflationary spikes. While the monetisation of gold assets will boost liquidity in the system, capital market instruments will be better than allowing banks to hold gold assets.....

Read - BS